ACCA Advanced Taxation (ATX) Practice Exam

What is the income tax rate applied to remitted overseas income?

1. 15%

2. 20%/40%/45%

3. 25%

4. 30%

The correct answer is: 20%/40%/45%

The income tax rate applied to remitted overseas income is often tiered, meaning that different portions of income may be taxed at different rates. In many jurisdictions, such as the UK, the tax rates for personal income can be categorized into bands. The rates could typically be set at 20% for income within a certain range, rising to 40% for higher earnings, and even potentially reaching 45% for the highest earners. When individuals or entities remit income earned overseas to their home country, this income usually falls under the same progressive tax rates as domestic income. Hence, the application of various rates (20%, 40%, and 45%) for different income levels makes this choice correct. In practice, individuals could find themselves in different tax brackets based on the total amount of their remitted overseas income, thus incurring a varied tax liability aligned with the mentioned rates. The other options represent fixed rates that do not account for the tiered nature of tax bands typically used in personal taxation, which can vary significantly depending on income levels and the specific regulations of the jurisdiction in question.