A company wants to set up their headquarters in Spain where the corporate tax rates are as follows: 11% of first $40,000 profits, 22% of next $26,000, 39% of next $29,000, and 42% of everything over $95,000. Consultants estimate that they will have gross revenues of $380,000, total costs of $120,000, and $15,000 in allowable tax deductions.

What is taxable income for the first year and how much should the company expect to pay in taxes?

Question

Business

Morrison

13 December, 21:32

A company wants to set up their headquarters in Spain where the corporate tax rates are as follows: 11% of first $40,000 profits, 22% of next $26,000, 39% of next $29,000, and 42% of everything over $95,000. Consultants estimate that they will have gross revenues of $380,000, total costs of $120,000, and $15,000 in allowable tax deductions.

What is taxable income for the first year and how much should the company expect to pay in taxes?

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Answers (1)

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Douglas Nielsen · Answer 1

Total taxable income = $245,000

Total Tax = $84430

Explanation:

given data

11% of first = $40,000 profits

22% of next = $26,000

39% of next = $29,000

42% of over = $95,000

gross revenues = $380,000

total costs = $120,000

allowable tax deductions = $15,000

to find out

taxable income for the first year and how much should the company expect to pay in taxes

solution

we get here first Total taxable income that is

Total taxable income = Total revenue - (Total cost + Tax deductions) ... 1

put here value we get

Total taxable income = $380,000 - ($120,000 + $15,000)

Total taxable income = $380000 - $135000 = $245,000

so total tax will be

Total Tax = [0.11 * 40000 + 0.22 * 26000 + 0.39 * 29000 + 0.42 * (245000 95000) ]

Total Tax = 4400 + 5720 + 11310 + 63000

Total Tax = $84430