Taxation Principles and Regulations Flashcards
7 cards from real ACCA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Taxation Principles and Regulations flashcards as text
A US corporation receives a $100,000 dividend from a 15%-owned foreign corporation. Under the TCJA, what is the dividends received deduction (DRD) percentage available?
Answer: 65%
A 65% DRD applies to dividends from corporations in which the taxpayer owns at least 20% but less than 80% of stock; for less than 20% ownership, the DRD is 50%.
Under the ACCA syllabus, what is the key difference between tax evasion and tax avoidance?
Answer: Tax evasion is illegal concealment of tax liability; tax avoidance is legal reduction of tax liability
Tax evasion involves illegal concealment or misrepresentation of income or assets, while tax avoidance involves legally reducing tax liability by exploiting provisions within the law.
Under OECD BEPS Action Plan 13, what three-tiered documentation approach is required for multinational enterprises?
Answer: Country-by-Country Report, Master File, and Local File
BEPS Action 13 requires a Country-by-Country Report (CbCR), a Master File with group-level information, and a Local File with entity-specific transfer pricing documentation.
Which of the following describes the 'economic substance' requirement for business entities in offshore jurisdictions?
Answer: Entities must have real employees, premises, and management decision-making in the jurisdiction
Economic substance requirements mandate that entities claiming tax residence in a jurisdiction have genuine employees, adequate expenditure, physical premises, and core income-generating activities there.
A self-employed individual has net self-employment income of $100,000. What is the deductible portion of self-employment tax for income tax purposes?
Answer: One-half of the SE tax paid
Self-employed individuals may deduct one-half of their self-employment tax as an above-the-line deduction to reflect the employer's share of FICA taxes.
In the context of VAT/GST, what is the 'destination principle'?
Answer: Tax is levied in the country where goods or services are consumed
The destination principle taxes goods and services where they are consumed, making exports zero-rated and imports taxable in the consuming country.
Under the US check-the-box regulations, which entity type CANNOT elect its tax classification?
Answer: A corporation incorporated under state law
Per se corporations, including entities incorporated under state corporation statutes, cannot elect a different tax classification and must be taxed as corporations.