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31 May, 09:48

A company wants to set up operations in a country with the following corporate tax rate structure: Taxable Income Tax Rate $100,000 39% Therefore, a taxable income of $60,000 would result in taxes due of $50,000*0.15 + ($60,000-$50,000) * 0.25 = $50,000*0.15 + $10,000*0.25 = $10,000 If the compay expects gross revenues of $400,000, $100,000 in total costs, $60,000 in allowable tax deductions and $12,000 in a one-time business start-up credit, how much should the company expect to pay in taxes?

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  1. 31 May, 09:54
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    Taxable income = $240,000

    Amount payable = $64,850

    Explanation:

    As per the data given in the question,

    Taxable income:

    Gross revenue = $400,000

    Total cost = $100,000

    Net profit = $400,000 - $100,000 = $300,000

    Allowable tax deduction = $60,000

    Taxable income = $300,000 - $60,000

    = $240,000

    Tax to be paid:

    Computation of tax Amount to be taxed Rate Tax

    $50,000 $50,000 15% $7,500

    $50,000 to $75,000 $25,000 25% $6,250

    $75,000 to $100,000 $25,000 34% $8,500

    More than $100,000 $140,000 39% $54,600

    Total tax $76,850

    Amount payable = Total tax - Tax credit

    = $76,850 - $12,000

    =$64,850
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