Question

A Germany based company (head office in Hamburg) has one domestic and Different oversea permanent establishments:

1. The Poland based permanent establishment took profits of €200,000.

• The applicable DTC stipulates the exemption method.

• No taxes are paid in Poland so far.

2. The Brazil based permanent establishment took profits of €100,000.

• There is no DTC applicable.

• Corporate income taxes of €30,000 are paid in Brazil.

3. The Spain based permanent establishment incurred losses of €100,000.

• The applicable DTC stipulates the exemption method.

• No taxes are paid in Spain so far.

4. The Brazil based permanent establishment incurred losses of €20,000.

• There is no DTC applicable.

• Corporate income taxes of €5,000 are paid in Brazil.

Answer 1

	Poland	Brazil	Spain	Brazil	Total
Profit/Loss	200000	100000	-100000	-20000	180000
tax	0	30000	0	5000	35000

Consolidation of total income done =180000

Total profit & loss done =35000

Because financials are made when figures are consolidated.So net income is calculated 145000