Skane Shipping Ltd. (SSL) operates a fleet of container ships in international trade between Sweden and Singapore. All of the shipping income (that is, that related to SSL's ships) is deemed to be earned in Sweden. SSL also owns a dock facility in Singapore that services SSL's fleet. Income from the dock facility is deemed to be earned in Singapore. SSL's income deemed attributable to Sweden is taxed at a 75 percent rate. Its income attributable to Singapore is taxed at a 25 percent rate. Last year, the dock facility had operating revenues of $11 million, excluding services performed for SSL's ships. SSL's shipping revenues for last year were $84 million. Operating costs of the dock facility totaled $14 million last year and operating costs for the shipping operation, before deduction of dock facility costs, totaled $50 million. No similar dock facilities in Singapore are available to SSL. However, a facility in Malaysia would have charged SSL an estimated $8 million for the services that SSL's Singapore dock provided to its ships. SSL management noted that had the services been provided in Sweden, the costs for the year would have totaled $20 million. SSL argued to the Swedish tax officials that the appropriate transfer price is the price that would have been charged in Sweden. Swedish tax officials determined that the Malaysian price is the appropriate one. Required: Calculate the revenues costs income taxes and total taves for both SSL and the Dock Facility using the Malaysian basis
Skane Shipping Ltd. (SSL) operates a fleet of container ships in international trade between Sweden and Singapore. All of the shipping income (that is, that related to SSL's ships) is deemed to be earned in Sweden. SSL also owns a dock facility in Singapore that services SSL's fleet. Income from the dock facility is deemed to be earned in Singapore. SSL's income deemed attributable to Sweden is taxed at a 75 percent rate. Its income attributable to Singapore is taxed at a 25 percent rate. Last year, the dock facility had operating revenues of $11 million, excluding services performed for SSL's ships. SSL's shipping revenues for last year were $84 million. Operating costs of the dock facility totaled $14 million last year and operating costs for the shipping operation, before deduction of dock facility costs, totaled $50 million. No similar dock facilities in Singapore are available to SSL. However, a facility in Malaysia would have charged SSL an estimated $8 million for the services that SSL's Singapore dock provided to its ships. SSL management noted that had the services been provided in Sweden, the costs for the year would have totaled $20 million. SSL argued to the Swedish tax officials that the appropriate transfer price is the price that would have been charged in Sweden. Swedish tax officials determined that the Malaysian price is the appropriate one. Required: Calculate the revenues costs income taxes and total taves for both SSL and the Dock Facility using the Malaysian basis
SWFT Essntl Tax Individ/Bus Entities 2020
23rd Edition
ISBN:9780357391266
Author:Nellen
Publisher:Nellen
Chapter17: Business Tax Credits And The Alternative Minimum Tax
Section: Chapter Questions
Problem 17P
Related questions
Question
100%
Transcribed Image Text:Skane Shipping Ltd. (SSL) operates a fleet of container ships in international trade between Sweden and Singapore. All of the shipping
income (that is, that related to SSL's ships) is deemed to be earned in Sweden. SSL also owns a dock facility in Singapore that services
SSL's fleet. Income from the dock facility is deemed to be earned in Singapore. SSL's income deemed attributable to Sweden is taxed
at a 75 percent rate. Its income attributable to Singapore is taxed at a 25 percent rate. Last year, the dock facility had operating
revenues of $11 million, excluding services performed for SSL's ships. SSL's shipping revenues for last year were $84 million.
Operating costs of the dock facility totaled $14 million last year and operating costs for the shipping operation, before deduction of
dock facility costs, totaled $50 million. No similar dock facilities in Singapore are available to SSL.
However, a facility in Malaysia would have charged SSL an estimated $8 million for the services that SSL's Singapore dock provided to
its ships. SSL management noted that had the services been provided in Sweden, the costs for the year would have totaled $20
million. SSL argued to the Swedish tax officials that the appropriate transfer price is the price that would have been charged in
Sweden. Swedish tax officials determined that the Malaysian price is the appropriate one.
Required:
1. Calculate the revenues, costs, income taxes and total taxes for both SSL and the Dock Facility using the Malaysian basis.
2. Calculate the revenues, costs, income taxes and total taxes for both SSL and the Dock Facility using the Swedish basis.
3. What is the difference in tax costs to SSL between the alternate transfer prices for dock services, that is, its price in Sweden versus
that in Malaysia?
Complete this question by entering your answers in the tabs below.
Malaysia Basis Sweden Basis
Difference in
Taxe
Calculate the revenues, costs, income taxes and total taxes for both SSL and the Dock Facility using the Malaysian basis. (Do
not round intermediate calculations. Enter your answers in millions rounded to 2 decimal places.)
Shipping Dock
Facility
Company
Total revenue
Total costs
Income taxes
Total taxes
million
< Malaysia Basis
Sweden Basis >
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 4 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Financial Reporting, Financial Statement Analysis…
Finance
ISBN:
9781285190907
Author:
James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:
Cengage Learning