Miramontes Corp. is a multinational U.S. company. deriving royalty income from worldwide operations. During the year,...
Miramontes Corp. is a multinational U.S. company. deriving royalty income from worldwide operations. During the year, Miramontes received $100 million in royalty for use of its technology from China. Is this royalty income “U.S. Source” or “foreign source”?
Homework Answers
Ans. : As per the relevant provisions applicable:
* Royalties for use of a technology is taxable
in the place where the technology is used. Accordingly, when the
royalty is for use of a technology in manufacturing, it is to be
taxed at the situs of manufacturing the product, and
* when the royalty is for use of technology in functioning of the
product so manufactured, it is to be taxed at the situs of use.
* As per the information given in question, Miramontes received $100 million in royalty for use of its technology from China. Therefore, royalty income is of " foreign source".
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