Question

a canadian corporation has a branch office in england. it earns cdn $1,000,000 and pays 40% uk taxes. the canadian corporate tax rate is 25%. why would canada not collect taxes on the uk branch income? question 11select one: a. the uk branch would be responsible for paying canada's share of the taxes it collects, under the terms of the tax treaty between the two countries. b. canada taxes only canadian sourced income of canadian corporations. c. the uk tax rate is higher than the canadian tax rate on the income. d. canada has no right to tax the income under the terms of the tax treaty between the two countries.

Answer 1

Canada likely does not tax the UK branch income because the UK tax rate is higher than Canada's, which is a common measure to prevent double taxation, often governed by tax treaty agreements between countries.

Step-by-step explanation:

You asked why Canada would not collect taxes on the income earned by a Canadian corporation's branch office in England, given that the UK branch has already paid a 40% tax rate to the UK government while the Canadian corporate tax rate is 25%. The most likely reason is option C: the UK tax rate is higher than the Canadian tax rate on the income. This scenario is common in international business, where income earned abroad may not be subject to additional taxation by the company's home country if the tax rate paid abroad is higher than the domestic rate. This aims to prevent double taxation, a principle often found in tax treaties between countries. Nonetheless, to provide a definitive answer, one would need to refer to the specific tax treaty agreements between Canada and the UK, which typically outline how taxation is handled to avoid double taxation on the same income.