If a Foreign Subsidiary Is Located in a Low Tax

question 5

Multiple Choice

If a foreign subsidiary is located in a low tax country, the parent company would probably use a ________.

• A)high transfer price on inventory shipped from the parent to the subsidiary
• B)high transfer price on goods sold by the subsidiary to the parent
• C)low transfer price on inventory shipped from the subsidiary to the parent
• D)tax credit price to minimize local tax liabilities

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Definitions:

Commercial Large-Scale

Pertaining to production or operations conducted on a wide, extensive scale, primarily for economic gain.

Sport Fishing

The recreation of catching fish for pleasure or competition, as opposed to commercial fishing.

Sewage

Wastewater that typically contains contaminants and is produced by residential, industrial, and commercial establishments, requiring treatment before being released into the environment.

Natural Extinction

The process by which species become extinct due to natural factors such as environmental changes, loss of habitat, or failure to adapt to competition.