Finance Taxation Online Test: Questions, Solutions and Analysis

This document provides a comprehensive analysis of a taxation online test, addressing key concepts such as tax deductions, loss carry forward, and corporate tax liabilities. The solution examines the permissibility of tax deductions, the application of loss carry forward rules, and the calculation of tax liabilities for a company based on specific financial scenarios. Furthermore, the document delves into the concept of double taxation, differentiating between corporate and international double taxation and providing examples to illustrate the challenges faced by businesses. It also mentions the methods to mitigate the impact of double taxation. The document is well-structured, providing clear explanations and calculations, making it a valuable resource for students studying taxation and finance. The assignment provides detailed answers to questions related to corporate tax in Estonia and double taxation.

TAXATION ONLINE TEST

Table of Contents
QUESTION 1........................................................................................................................................3
1.1......................................................................................................................................................3
1.2......................................................................................................................................................3
1.3......................................................................................................................................................3
1.4......................................................................................................................................................3
QUESTION 2........................................................................................................................................4
REFERENCES......................................................................................................................................5

QUESTION 1
1.1
The tax deduction of the 10m € and 15m € is not permissible to deduct from the tax
obligation. Nokian Renkaat Oyj has charge the payment against the income of the business
entity. The payment is not done to operate business functions of the origination so it is not
permissible to deduct against the income of the business entity.
1.2
As per the income tax law the losses can carry forward for the next 10 financial years.
In respect to the Nokian Renkaat Oyj company has addressed loss of 200 m € will be set off
against the income of 2019 and 2020. The loss carry forwarded will adjust the whole profit of
the year 2019 that is 100 m € and the 100m € of the year 2020. The taxable profit for the
company in the year 2020 is 50m €.
Tax liability:
2020: 50m € * 20%
= 10m €
1.3
2019:
= 100m € * 20%
= 20m €
2020
= 150m € * 20%
= 30m €
1.4
Yes, Nokian RenkaatOyj s required to pay corporate as per the Estonian corporate tax. As
there is a simple rule which states that the company is tax resident in Estonia if it is
incorporated under the Estonian laws and is therefore, subjected to taxin Estonia. The place

of taxation will be Estonia and the amount would be 20m in 2019 (100m *20%) and 30m in
2020 (150m *20%). This is because there is no rule for carry forward of losses.
QUESTION 2
Double taxation mainly refers to the situation when an individual or a corporate pays
income tax twice on the same source of income. In respect to the businesses, it refers to the
corporation which is taxed both at personal and business levels. Double taxation comes into
play because business corporation is considered separate from its owners or their
shareholders. The corporation pays tax on their net earnings while the when the same
corporation pays dividend to its shareholder, it is also having a tax liability (Lang, 2021).
Thus, the shareholders are also required to pay tax on dividend received. There are mainly
two types of double taxation, one is corporate double taxation in which the tax on the net
earnings of the corporate through corporate tax and dividend tax is applicable onthe dividend
pay-outs. Another is the international double taxation which mainly involves the taxation
of the foreign income in the country where the income is derived along within the country in
which the investor is a resident (Dumiter and Jimon, 2017). It mainly concerns the
international organizations which operates in jurisdictions apart from its home country but
also it can impact the foreign income being earned by the individuals within the foreign
countries. There are number of examples pertaining to it where the foreign income is taxed in
the country where the income is derived and also where the investor resides. Therefore, these
are the two types multiple taxation which is being faced by the corporates which results into
inducing hardships on the taxpayers. The corporate double taxation is common but internal
doble taxation can be mitigated through the way of formulating trade treaties like the double
taxation agreements (DTAs) with the nations it trades with and also by using the relief
approaches like the exemption method and foreign tax credit method.

REFERENCES
Books and Journals
Lang, M., 2021. Introduction to the law of double taxation conventions. Linde Verlag GmbH.
Dumiter, F. and Jimon, Ș., 2017. Avoidance of international double taxation. Taxation of
business profits in Romania. Juridical Tribune/TribunaJuridica. 7(2).