Income tax: changes from 2021, features of accounting for income and expenses

What are the differences between income tax in accounting and tax accounting?

To reflect operations on the formation of income tax (hereinafter referred to as NP), PBU 18/02 “Accounting for calculations of income tax of organizations” is used. In accordance with PBU, a business entity must distinguish between accounting profit and profit for calculating NP. Profit in accounting (hereinafter referred to as BU) is adjusted for differences that arise between accounting records and tax calculations, forming profit in tax accounting (hereinafter referred to as TA). These differences are divided into temporary and permanent (clause 3 of PBU 18/02).

There are two types of temporary differences - deductible and taxable (clause 10 of PBU 18/02). Deductible temporary differences form a deferred tax liability (DTL). Such differences occur if the amount of expenses according to the financial accounting system exceeds the amount of expenses in the financial accounting system or the amount of income in the financial accounting system exceeds the amount of income in the financial accounting system. IT is the product of the tax rate of 20% and the difference between the accounting and tax bases; the resulting “deferred tax” reduces the value of the tax base in the current period, while increasing the tax in subsequent periods. The reasons for the formation of ONO may be, for example, the use of unequal depreciation methods (in the accounting system the cost of a fixed asset can be written off faster than in the accounting system), the use of a depreciation bonus in the accounting system (in the accounting system the depreciation bonus is taken into account in expenses, for accounting this concept does not exist), purchase of workwear (in BU the cost of clothing is written off gradually, in NU - immediately). Taxable differences, or deferred tax assets (DTA), on the contrary, occur when expenses in the accounting system exceed expenses in the accounting system and income in the accounting system exceeds income in the accounting system. For example, the sale of a fixed asset at a loss (if the accounting system recognizes the loss immediately, and in the accounting system gradually), the gratuitous receipt of a fixed asset not from the founder (in the accounting system, the income from the received fixed asset will be taken into account immediately in non-operating income, in the accounting account the amount of income will be taken into account in parts the entire depreciation period). The algorithm for determining ONA is similar to that used when calculating ONA, while the resulting value, on the contrary, increases the IR of the current period, but reduces the future IR.

Let us consider with examples the emergence and calculation of ONA and IT.

Example 1

The amount of costs incurred in connection with the depreciation of fixed assets as of June 30, 2016, in the accounting system amounted to 1,500,000 rubles, in the national accounting system - 1,300,000 rubles.

Let's determine the difference between BU and NU:

1 500 000 – 1 300 000= 200 000.

Note that the resulting difference is due to different rules for calculating depreciation provided for by the accounting policy (hereinafter referred to as the UP), taking into account the requirements of PBU 6/01 and Chapter. 25 Tax Code of the Russian Federation. This discrepancy led to the formation of ONA in the amount of 20% × 200,000 = 40,000 rubles. IT will be written off as the amount of depreciation in NU increases.

Example 2

When putting a fixed asset into operation, the organization applied a depreciation bonus in accordance with clause 9 of Art. 257 of the Tax Code of the Russian Federation in the amount of 10%. The initial cost of the fixed asset is RUB 7,000,000.

The amount of depreciation bonus that can be taken into account in expenses for NU was 7,000,000 × 10% = 700,000 rubles. For the purpose of calculating BU, the specified expense cannot be taken into account, since PBU 6/01 does not provide for this. In accounting, an IT will be formed in the amount of 20% × 700,000 = 14,000 rubles, which will be repaid after the cost of the specified fixed asset is completely written off.

PBU 18/02 also highlights permanent differences. Permanent differences are classified into permanent tax liability (PNO) and permanent tax asset (PNA) (clause 4 of PBU 18/02). PNO has the same principle of occurrence as ONA, since PNO increases the value of NP of the reporting period. The main difference between the two differences is that PIT will not be taken into account in the future when calculating tax. PNA has common features with ONO, reducing the tax of the current period, but just like PNA, it is not written off later. The value of PNO and PNA is calculated as the product of the difference between BU and NU and the rate of 20%.

Let's look at examples.

Example 3

The organization in 2015 incurred advertising expenses in the amount of 850,000 rubles. At the same time, revenue for the specified period amounted to 50,000,000 rubles.

In accordance with paragraph 4 of Art. 264 of the Tax Code of the Russian Federation, advertising expenses for the purposes of NP can be taken at a value not exceeding 1% of revenue.

The organization has the right to take into account 1% × 50,000,000 = 500,000 rubles in expenses.

The difference between BU and NU will be 850,000 – 500,000 = 350,000 rubles.

PNO - 350,000 × 20% = 75,000 rubles.

Example 4

The tax authority returned the previously overpaid property tax in the amount of 300,000 rubles to the organization’s current account.

In the accounting system, the specified amount will be reflected in income, while in the tax accounting system, tax refunds are not recognized as income when determining the taxable base when calculating income tax (subclause 21, clause 1, article 251 of the Tax Code of the Russian Federation).

Thus, a PNA of 300,000 × 20% = 60,000 rubles will be formed.

Details

Types of taxable income

Taxable profit is generated from sales income. During the sales process, the company transfers to other persons goods of its own production or previously purchased, as well as services, in order to receive benefits. Sales revenue is the proceeds that are received as part of this process. Other income is considered non-operating income, which includes:

— positive exchange rate differences;

— dividends;

— profit from rental property;

— cost of surplus based on inventory results;

— interest on loans and borrowings;

— fines, penalties, penalties that were received for violations of obligations by suppliers;

- property, if it was acquired free of charge.

REFERENCE! The list of non-sale income is open, which means that it also includes private, occasionally occurring processes of generating profit not from the main type of activity.

Income not subject to income tax

Taxable profit does not include:

— income in the form of property secured by security or rights to it;

- inseparable fixed investment in leased property;

— income in the form of property on loan;

— income in the form of property acquired as targeted subsidies;

— contributions to the authorized capital;

- other income that is described in Article 251 of the Tax Code.

Expenses

Taxable income may be reduced by certain expenses. Thus, deductions include expenses related to the manufacture and sale of the main product. There are several groups of them:

— materials;

- salary;

— depreciation;

- other expenses.

In addition, taxable profit is reduced due to the costs of non-sale transactions. This category includes:

— fines and penalties paid;

— legal costs;

— losses of previous periods;

— payment for banking services;

- other expenses prescribed in Article 265 of the Tax Code.

Article 270 of the Tax Code creates a closed list of expenses for which taxable profit cannot be reduced. The Tax Code imposes serious requirements on the costs incurred by enterprises. They should be:

- documented;

- rational and necessary;

- only for the purposes of activities that relate to generating income.

Important nuance! Taxable profit is calculated on an accrual basis from the beginning to the end of the period. If expenses exceed income, it will be negative. Then it is equated to zero. In subsequent periods, taxable profits may be reduced by the amount of previously incurred losses. This is prescribed by law.

Reduction of taxable profit

It must be said that taxable profit is calculated by organizations that use OSNO. Enterprises that work under UTII and the simplified tax system are exempt from this. The interest rate for this tax is 20%, 18 of which are sent to the regional budget and 2 to the federal budget. For some types of activities, the law provides for a reduction in the rate. In addition, some benefits have been defined for certain groups of enterprises. For example, a zero tax rate is defined for:

— educational institutions;

— medical institutions;

- agricultural enterprises.

REFERENCE! To confirm the right to a rate reduction, you need to provide the tax office with the necessary documents that prove that the company is engaged in one of the above types of activities.

How to maintain corporate income tax accounting?

In the BU NP account 68 is used, to which the “Income Tax” subaccount is opened (for example, 68.01).

It is necessary to highlight the following sequence of reflection in the accounting of transactions for calculating NP:

• Accrual of conditional expenses - Dt 99 Kt 68.01 or conditional income - Dt 68.01 Kt 99.

Conditional expense is a tax calculated at a rate of 20% on accounting profit. Conditional income is the amount of tax in the accounting system determined from the loss that is formed on the basis of accounting data (clause 20 of PBU 18/02).

For example, in accordance with the accounting system, the amount of profit for the 1st quarter. 2021 — 1,100,000 rub. The conditional expense will be determined as 20% × 1,100,000 = 220,000 rubles.

• Reflection of entries for differences that have arisen: Dt 09 Kt 68.01 - ONA;
• Dt 68.01 Kt 77 - IT;
• Dt 99 Kt 68.01 - PNO;
• Dt 68.01 Kt 99 - PNA.

In this case, the repayment of the differences will be reflected in “mirror” entries: Dt 68.01 Kt 09 - repayment of IT, Dt 77 Kt 68.01 - repayment of IT.

The conditional expense (income) reflected in the accounting, as well as temporary and permanent differences, form a current IR or loss in account 68, the value of which will be reflected in the IR declaration.

Let's look at an example.

The organization reflected the following income and expenses for 2015:

In the NU register, the organization will reflect the following income and expenses:

Thus, in the organization’s accounting, the following differences have been identified between accounting and financial accounting:

The organization on December 31, 2015 will reflect the following transactions:

Dt 99 Kt 68 - 651,000 rub. = 3,255,000 × 20% — accrual of conditional expenses for NP;

Dt 09 Kt 68 — 30,000 rub. = (100,000 +50,000) × 20% — accrual of ONA;

Dt 99 Kt 68 - 35,400 rub. = (27,000 +150,000)× 20% — accrual of PNO;

Dt 68 Kt 99 - 156,000 rub. = 780,000 × 20% — accrual of PNA

Thus, the current NP will be equal to RUB 560,400. = 651,000 + 30,000 +35,400 – 156,000.

In reporting in Form 2, the organization will reflect information on the calculation of NP in the following lines:

• 2300 - 3,255,000 - profit before tax;
• 2410 - 560 400 - current NP
• 2421 - 120,600 (156,000 - 35,400) - the value of PNA and PNA;
• 2450 - 30,000 - ONA amount;

If the organization had accrued IT, then the value for the specified difference would be shown on line 2430.

Payment for NP will be reflected by posting Dt 68.1 Kt 51 - 560,400 rubles.

On the reflection of taxes in financial statements

Many organizations classified as micro-enterprises apply a basic taxation system, which provides for the calculation and payment of income tax, VAT, etc.

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At the same time, we reflect the accrual and payment of tax on the accounting accounts in the same way as any other fact of the economic life of the organization.

In the Financial Results Report for the calendar year, we indicate the amount of calculated income tax as the value of a specially provided indicator on line 2410 of the simplified form of the “Income Taxes (Income)” report.

This should be done, as a general rule, taking into account the requirements of PBU 18/02, which make it possible to eliminate the discrepancies that exist in accounting and tax accounting.

(The whole point is that due to differences in the composition and procedure for recognizing income and expenses, the amount of accounting (balance sheet) and taxable profit may not coincide. This means that simply multiplying the profit received by the tax rate is not enough. This will not show the amount of real tax obligations of the organization. Only by observing the requirements of PBU 18/02 and reflecting the differences that arise, can the real amount of tax be determined in accounting.)

❢ But micro-enterprise organizations have the right not to apply the provisions of PBU 18/02, which significantly simplifies accounting and preparation of financial statements, because allows us to simply reflect on the accounting accounts the amount of income tax indicated in the tax return:

Dt 99-Income tax Kt 68-Income tax AMOUNT OF INCOME TAX

If a micro-enterprise organization applies a simplified taxation system, then the amount of the calculated single tax paid in connection with the application of the simplified tax system is reflected in the accounting accounts in the amount specified in the tax return, with the following accounting entry:

Dt 99-Income tax Kt 68-Single tax simplified tax system AMOUNT OF SINGLE TAX

Organizations that have chosen a basic or simplified tax system have the right, as is known, to use additional UTII for certain types of their activities, with separate accounting.

In this case, the micro-enterprise organization quarterly during the year (on March 31, June 30, September 30 and December 31) reflects in its accounting accounts the calculated amount of UTII tax indicated in the relevant tax returns with the following accounting entries:

Dt 99-Income tax Kt 68-UTII AMOUNT UTII

As already noted, a micro-enterprise organization can generate a Statement of Financial Results in a simplified form (provided that such a possibility is provided for by the organization’s accounting policies).

The simplified form of the accounting report on financial results was approved by Appendix No. 5 to Order No. 66n of the Ministry of Finance of the Russian Federation.

In this form, unlike the standard one, all indicators are aggregated.

We enter income tax or the Unified Tax under the simplified tax system, as well as UTII (if any), into the value of the indicator on line 2410 “Income taxes (income)”.

➨ We check the relationship between the indicators: the amount of income tax or the single tax of the simplified tax system, as well as the amount of UTII (if any) must coincide with the amounts declared by us, respectively, in the tax return for income tax or the tax return for the single tax paid in connection with the use of the simplified tax system , as well as with the amounts of UTII declared during the calendar year (if any).

✿ There is no special line in the simplified form of the accounting report on financial results to reflect other taxes (property tax, transport tax, land tax).

The amounts of these taxes can be reflected as part of the total amount on line 2120 “Expenses for ordinary activities” or even on line 2350 “Other expenses”, depending on the main or auxiliary role of the relevant tax objects used in the business activities of the organization (real estate, including land areas, vehicles).

✿ Amounts of personal income tax withheld by an organization during a calendar year from payments to individuals under employment and civil law contracts, as well as accrued insurance premiums are not indicated separately in the accounting Report on financial results, but nevertheless these amounts are components of the amounts indicated under line 2120 “Expenses for ordinary activities.”

In other words, personal income tax amounts are included in those payments from which it was withheld. And insurance premiums are shown along with the income on which they were accrued. For example, from employee salaries.

✿ Penalties and fines for taxes and contributions are shown in the total amount on line 2350 “Other expenses” of the simplified form of the financial statements or in the field of line 2410 “Income taxes (income)”.

(Line 2350 “Other expenses” also reflects penalties and sanctions on contractual obligations, but they, of course, are not tax expenses.)
REPORT ON FINANCIAL RESULTS (simplified form) (Example of reflecting taxes and contributions)

➚ Order of the Ministry of Finance of Russia dated July 2, 2010 N 66n (as amended) “On the forms of financial statements of organizations”

How to organize tax accounting?

The procedure for organizing NU is stated in Art. 313 Tax Code of the Russian Federation. In accordance with this norm, business entities calculating NP need to formulate an accounting policy (hereinafter referred to as UP) for NP purposes. The UE should reflect the main points of the NU, which make it possible to determine the possibility of including income and expenses in the taxable base. In addition, the UE contains tax registers developed and used by the organization, from which one can see the composition of income and expenses involved in the formation of the tax base.

Based on the NU data, the taxpayer draws up a IR declaration, the form of which was approved by Order of the Federal Tax Service of Russia dated November 26, 2014 No. ММВ-7-3/ [email protected]

Updating the income tax return form

Starting with reporting for 2021, a new form of the corporate income tax declaration is in effect, the format for its electronic submission and the procedure for filling it out, approved. by order of the Federal Tax Service of Russia dated September 23, 2019 No. ММВ-7-3/ [email protected]

The need to make amendments is caused by numerous changes to the Tax Code of the Russian Federation that relate to income tax. In particular, related to the investment tax deduction: two new lines have been added to Sheet 02 - 268 and 269. They indicate the amount of reduction in advance payments (tax) when applying the investment tax deduction. Also, sheet 02 has been supplemented with a new Appendix No. 7. It is intended for calculating the investment tax deduction. Appendix No. 6b to sheet 02, which calculates the tax base of the consolidated group of taxpayers, has been changed.

In 1C:Enterprise 8 solutions, a new form of income tax declaration, the format of its electronic presentation and auto-filling are supported. More information about the timing of implementation of changes can be found in “Monitoring changes in legislation” in the “Income Tax” section.

Let us remind you that the income tax return for 2021 must be submitted to the Federal Tax Service no later than March 30, 2020.

Who has the right not to account for corporate income tax?

In accordance with PBU 18/02, accounting for NPs is not carried out (clauses 1, 2 of PBU 18/02):

• Companies and individual entrepreneurs that do not calculate taxes. These categories include: special regime officers - on the simplified tax system, UTII, Unified Agricultural Tax, as well as those executing a production sharing agreement and other persons exempt from paying tax in accordance with the provisions of Chapter. 25 Tax Code of the Russian Federation. Let us remind you that economic entities under special regimes pay a single tax and are exempt from the tax burden under NP.
• Credit organizations.
• State or municipal enterprises.
• Organization with simplified accounting. Moreover, if such organizations do not have NU, this must be reflected in the UP.

For information on who should apply PBU 18/02, see the article “ PBU 18/02 - who should apply and who should not?” "

New category of tax agents for income tax

According to the norms of the Tax Code of the Russian Federation, in force until January 1, 2020, only Russian organizations and permanent representative offices of foreign organizations were recognized as tax agents for income tax when paying certain income.

From 2021, individual entrepreneurs also become tax agents for corporate income tax (for example, when paying, in accordance with paragraph 1 of Article 309 of the Tax Code of the Russian Federation, income from sources in the Russian Federation to a foreign organization without a permanent establishment in Russia). Corresponding changes have been made to paragraph 1 of Article 310 of the Tax Code of the Russian Federation (clause 41 of Article 2 of Law No. 325-FZ).

Since the amendments are effective from 01/01/2020, the responsibilities of a tax agent for an individual entrepreneur arise when paying the corresponding income after this date.

What is the responsibility for non-application of PBU 18/02?

The legislation does not provide for liability for non-application of PBU 18/02. At the same time, there are currently 2 articles that are applied as punishment for non-compliance with accounting rules:

• Art. 15.11 of the Administrative Code, which is applied in case of distortion of accounting records by more than 10%. For this violation, a fine of 5,000 to 30,000 rubles is provided.
• Art. 120 of the Tax Code of the Russian Federation: if accounting and tax registers are not used or the rules for reflecting expenses and income are violated, a fine of 10,000 to 30,000 is imposed; in case of underestimation of the base - a penalty of 20% of the unpaid amount.

If the taxpayer correctly keeps accounting records, forms all registers and fills out the declaration, then in order to apply the specified penalties, the tax authorities should first independently apply PBU 18/02 in order to determine the real amount of NP for calculating the amount of deviations, which can be a difficult procedure for them. But in order not to encounter questions from the tax authorities, we recommend that you still follow the rules provided for by PBU 18/02.

What is tax accounting

Tax accounting is a system for summarizing information that allows a taxpayer, based on data from primary accounting documents, to form a tax base for the reporting (tax) period (Article 313 of the Tax Code of the Russian Federation).

You develop the tax accounting system yourself, including determining:

• accounting methods;
• list and forms of tax registers;
• forms of primary accounting documents.

Analytical accounting is organized in such a way that it reveals the procedure for forming the tax base (Article 314 of the Tax Code of the Russian Federation). You establish the accounting system in the accounting policy for tax purposes (Articles 313, 314 of the Tax Code of the Russian Federation).

Important! The accounting system adopted by the taxpayer must be applied consistently from one tax period to another. Changes and additions to the accounting procedure may be made only if certain conditions are met (Article 313 of the Tax Code of the Russian Federation).

See also: How to correct errors in tax accounting for income tax

How to bring together accounting and tax accounting for income tax

There are many ways to bring tax and accounting closer together. For example, you can:

• choose the same methods for assessing raw materials and materials when writing them off (clause 8 of Article 254 of the Tax Code of the Russian Federation, clause 16 of PBU 5/01 “Accounting for inventories”);
• use data from accounting registers for tax accounting purposes (Article 313 of the Tax Code of the Russian Federation).

But often the convergence of tax and accounting can lead to an increase in the tax burden.

Let's give an example. In tax accounting, the use of bonus depreciation allows you to write off as expenses from 10 to 30% of the cost of a fixed asset at a time, thereby reducing the tax base and income tax (clause 9 of Article 258 of the Tax Code of the Russian Federation). The use of bonus depreciation in accounting is not provided for by the rules of PBU 6/01 “Accounting for fixed assets”. In this case, bringing tax and accounting accounting closer together is possible by eliminating bonus depreciation, but this is not beneficial for taxpayers.

Thus, when choosing a particular tax accounting method, we recommend that you first assess its impact on the tax burden and only then decide on the possibility of convergence with accounting. This will not only simplify accounting, but also not overpay tax.

Results

Applying the norms of PBU 18/02, organizations are faced with accounting for income tax calculations, which consists of reflecting entries for accounting for conditional expenses (income), as well as permanent and temporary differences. It should be noted that the current legislation does not provide for liability for non-application of the provisions of PBU 18/02.

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IAS 12 Income Taxes

What is the need for and scope of IAS 12?

IAS 12 “Income Taxes” regulates the accounting and reporting of income taxes. The main problem of the standard is to resolve the issue of how to take into account current and future tax consequences:

1. future reimbursement (repayment) of the current value of assets (liabilities) that are recognized on the company’s balance sheet;
2. business transactions and other events related to the reporting period recognized in the financial statements of the company.

The essence of IAS 12 is that a company's income tax expense includes current tax expense (recovery) and deferred tax expense (recovery). Thus, in accordance with this standard, deferred tax assets and/or liabilities, as well as changes in them, are reflected in the financial statements.

The standard in question should be applied to accounting for income taxes. Income taxes in IAS 12 refer to taxes calculated on the basis of profits established in accordance with both domestic and foreign laws, including withholding taxes paid by subsidiaries, associates and joint ventures when distribution of profits in favor of the reporting company.

Is there an analogue of IAS 12 in Russian accounting legislation?

Yes, it exists. The analogue of IAS 12 “Income Taxes” in Russian legislation is PBU 18/02 “Accounting for income tax calculations”. At the same time, PBU 18/02 has a number of significant differences in comparison with IAS 12, the key of which are:

1. the international standard is based on the approach from the point of view of the balance sheet, and PBU 18/02 - the income statement;
2. international and domestic standards provide for different schemes for reflecting income tax expenses in accounting accounts;
3. IFRS 12 does not address the accounting for permanent differences;
4. IFRS 12 requires more detailed disclosure of information on income taxes than PBU 18/02;
5. PBU 18/02 does not contain recommendations for reflecting income tax calculations in the event of a business combination and revaluation of assets and liabilities at fair value.

What are accounting and taxable profits under IAS 12?

Accounting profit (AP) is the net profit (loss) for the period before deduction of income tax expense.

Taxable profit (loss) (NP) is the amount of profit (loss) for the period, determined in accordance with the tax rules, on the basis of which the profit tax payable (reimbursable) is calculated.

When calculating income taxes, taxable income is multiplied by the applicable income tax rate , which is the tax rate established by tax law and in effect for the reporting period. The applicable income tax rate is also reflected in the return.

The amount of accounting profit almost never coincides with the amount of taxable profit, because National tax rules do not coincide with the provisions of IFRS. For example, in tax and accounting, different standards for calculating depreciation for fixed assets are used; individual expenses involved in calculating accounting profit are taken into account for tax purposes within the established norms (travel expenses, entertainment expenses, etc.); Accounting under IFRS is based on the accrual method, while tax legislation may require the cash method of recording income and expenses.

What are the costs of paying income taxes?

In accordance with IAS 12, a company's tax expenses (RTC) include:

1. expenses for current tax (reimbursement) (RTN); And
2. deferred tax expense (reimbursement) (RON).

RNP = RTN + RON

Current tax expense is based on national tax rules. The amount of deferred tax expense (reimbursement) is determined by temporary differences in the reflection of the facts of economic life in accordance with the rules of financial reporting and tax legislation.

What is current tax expense under IAS 12?

Current tax expense (RTN) is the amount of income tax payable (reimbursable) based on taxable profit (tax loss) for the period.

RTN = NP x Current income tax rate

The current tax is reflected in the tax return as the amount payable (reimbursable) for the reporting period and can be either positive or negative. It is necessary to distinguish the current tax from the current debt to the budget for income tax, reflected in the accounting accounts.

What is deferred tax expense (recovery) in accordance with IAS 12?

The expense (reimbursement) for deferred income tax (DIT) is determined by the amount of changes during the reporting period in the amount of assets and liabilities for deferred tax, determined using the balance sheet method. Deferred income tax expense (reimbursement) consists of the following components:

RON = Change in Caller ID + Change in UN

Where, AON is a deferred tax asset, UN is a deferred tax liability

What are temporary differences?

Temporary differences (TD) are differences between the book value (BC) of an asset or liability and its tax base (TB).

VR = BS – NB

Temporary differences may be:

• taxable temporary differences (TDT), which are temporary differences that give rise to taxable amounts in future periods when the carrying amount of an asset or liability is recovered (settled); or
• deductible temporary differences (DTD) , which are temporary differences that give rise to amounts that are deducted when calculating taxable profit (tax loss) in subsequent tax periods upon reimbursement (settlement) of the carrying amount of an asset or liability.

The difference between the book value of an asset (liability) and its value determined for tax purposes, i.e. the temporary difference is leveled out over time. Example A fixed asset was purchased for CU 100 thousand, the useful life according to the rules of tax legislation is 5 years, for accounting – 4 years. Depreciation for financial reporting and tax accounting purposes is calculated using the straight-line method. Let's define temporary differences:

What is the tax base of an asset?

The tax base (TB) is the amount at which an asset or liability is taken into account for tax purposes. The tax basis of an asset is the amount that will be recognized as an expense for tax purposes and deducted from any taxable income received by the company when it recovers the carrying amount of the asset. However, if the economic benefits are not taxed, the tax base of the asset is equal to its book value.

Example

1) The initial cost of the vehicle is CU 200 million. For tax purposes in the reporting and previous periods, depreciation in the amount of CU 30 was taken into account in relation to this fixed asset; the remaining cost will be deducted from future earnings in the form of depreciation or in the form of a deduction when the item is disposed of. Income received in connection with the operation of a vehicle is taken into account when calculating income tax. The tax base of the fixed asset is CU 170 million. (200 – 30). 2) The carrying value of the buyer's receivables for services rendered is CU 300 million. The relevant revenue has already been taken into account when determining taxable profit. The tax base of trade receivables is CU 300 million. 3) Interest receivable reflected in the financial statements is CU500 million. The related interest income will be subject to income tax on a cash basis. The tax base of interest receivables is zero.

The tax base of a liability is equal to its carrying amount, less any amounts that would be recognized as an expense for tax purposes in respect of the liability in future tax periods. In the case of income received in advance, the tax basis of the resulting liability is equal to its carrying amount less any amount of proceeds that will not be subject to tax in future periods. Example 1) Current liabilities include accrued penalties amounting to CU350 million. At the same time, for tax purposes, fines and penalties are not accepted as expenses. The tax base of the liability for accrued fines is CU 350 million.

What is a deferred tax liability and when is it recognized?

The deferred tax liability (DTL) is the amount of income taxes payable in future periods on taxable temporary differences. UN is recognized for all taxable temporary differences except to the extent that the difference arises from the initial recognition of an asset or liability in a business transaction that:

1. is not a business combination; And
2. at the time of implementation does not affect either accounting or taxable profit (loss).

The deferred tax liability is calculated as the product of the taxable temporary difference and the estimated income tax rate, which is the income tax rate that will apply in the period in which the temporary difference is settled.

UN = NVR x Projected tax rate

In this case, a taxable temporary difference arises when: BC asset > NB asset, or BC liability NB liability The accrual of the deferred tax liability is usually made by the following accounting entry:

However, if the taxable temporary difference is related to the temporary difference arising as a result of the revaluation of assets at fair value, attributable directly to the increase in capital - the revaluation reserve, then the source of accrual of the deferred tax liability is the capital account:

What is a deferred tax asset and when is it recognized?

Deferred tax asset (DTA) is the amount of income tax subject to reimbursement in subsequent tax periods in relation to:

1. deductible temporary differences,
2. unaccounted tax losses carried forward,
3. unused tax credits carried forward.

A deferred tax asset is recognized for all deductible temporary differences to the extent that it is probable that there will be sufficient taxable profit to utilize them, except to the extent that the initial recognition of the asset or liability is in a transaction that:

1. is not a business combination,
2. at the time of the transaction does not affect either accounting or taxable profit (loss).

AON = VVR x Forecast tax rate.

In this case, a deductible temporary difference arises when: BP of an asset BP of an asset, or BP of a liability > BP of a liability

ANI is accrued using the following accounting entry:

What should you pay attention to when determining the amount of deferred tax assets and liabilities?

Deferred tax assets and liabilities must be calculated based on the estimated income tax rates that are expected to apply in the periods when the asset is realized or the liability is settled, based on the tax rates and tax laws in effect at the reporting date. Also, when measuring deferred tax assets and liabilities, it is necessary to consider the manner in which the company expects to recover (settle) the carrying amount of assets (liabilities) .

Thus, in some national tax laws, the method of compensation (settlement) of the carrying amount of an asset (liability) affects the tax rate and tax base.

Example

The book value of the fixed asset is CU 100 million, the tax base is CU 60 million. In accordance with tax legislation, income from the sale of the specified asset is taxed at a rate of 20 percent, and all other profits are taxed at a rate of 30 percent.

NVR = asset BC – asset NB = 100 – 60 = 40 million.

Since the UN value = NVR x Forecast income tax rate, and NVR is equal to CU 40 million, the amount of the deferred tax liability depends on the applied rate.

If the organization expects to sell an asset, then the deferred tax liability = 40 x 20% = CU8 million.

In case of intention to further use the object, deferred tax liability = 40 x 30% = CU 12 million.

How is information presented in financial statements in accordance with IAS 12?

IAS 12 Income Taxes requires tax assets and liabilities to be shown separately from other assets and liabilities the balance sheet Deferred tax assets and liabilities are presented on the balance sheet as non-current assets and liabilities.

IAS 12 imposes strict restrictions on the offsetting ( balance sheet presentation) of income tax assets and liabilities.

Offsetting assets and liabilities for income taxes

Expenses (income from tax refunds) for income taxes must be reported directly on the income statement .

What are the disclosure requirements of IAS 12?

In accordance with IFRS 12, the main components of income tax expense (reimbursement) must be disclosed in the notes to the statements. In addition, the standard in question requires separate disclosure of:

1. the total amount of current and deferred taxes related to items that are debited or credited to equity;
2. expenses (reimbursement income) for paying taxes related to extraordinary items recognized during the period;
3. explanation of the relationship between income tax expense (reimbursement) and accounting profit;
4. an explanation of changes in the applicable tax rate(s) compared to the prior period;
5. the amount (and, if any, expiration date) of deductible temporary differences, unused tax losses and credits for which no deferred tax asset was recognized in the balance sheet;
6. the aggregate amount of temporary differences associated with investments in subsidiaries, associates, branches and joint ventures;
7. For each type of temporary differences, unused tax losses and unused tax credits:
8. the amount of assets and liabilities recognized in the balance sheet for each period presented;
9. the amount of tax refund income or tax expense recognized in the income statement if it is not apparent from changes in the amounts recognized in the balance sheet;
10. in respect of discontinued operations, tax costs associated with:
11. profit (loss) from termination of activity; And
12. profit (loss) from ordinary operations of discontinued operations for the period, together with the corresponding amounts for each preceding period;
13. the amount of the deferred tax asset and the basis for its recognition when:
14. the realization of the deferred tax asset is dependent on the realization of taxable future profits in excess of the profits arising from the settlement of existing taxable temporary differences; And
15. the company incurs a loss in the current or previous period, calculated for tax purposes on the position in respect of which the tax asset is determined.

How to perform calculations in accordance with IAS 12?

The order of actions that should be taken in order to comply with the requirements of IAS 12 “Income Taxes” can be generally presented as follows:

1. Determine the book value (BC) and tax base (BC) for each asset and liability at the reporting date using the “balance sheet method”;
2. For each asset and liability, calculate the temporary difference (TVR or TDT), remembering that:

VR = BS – NB

1. Calculate the deferred tax asset and liability at the reporting date as the sum of all those defined in paragraph 2, taking into account that

UN = NVR x Projected tax rate. AON = VVR x Forecast tax rate.

1. The received UN and AON amounts, calculated in paragraph 3, should be reflected in the balance sheet at the end of the reporting period (reporting date);
2. Calculate the difference between deferred tax assets and liabilities at the end and beginning of the reporting period. The indicated amount represents deferred tax expense (income), which must be included in the Profit and Loss Statement:

* exception : if transactions leading to the formation of a temporary difference are recognized directly in the equity account, then the corresponding account to the AON and UN accounts will be the equity account (for example, “Revaluation reserve”).

1. Calculate the amount of current tax expense (reimbursement) based on the rules of tax legislation and reflect it in the Profit and Loss Statement:

1. Prepare notes to the financial statements in accordance with IAS 12 “Income Taxes”.

Let us explain the calculation technique using a numerical example . Example Based on the balance sheet data of the ABC company as of the reporting date and the necessary notes, we will consider the procedure for calculating and reflecting deferred taxation in the accounts and financial statements. The income tax rate is unchanged for the reporting and future periods and is 24 percent.

Information about the company ABC million.

Notes:

1. During the year, land plots were revalued (accounted for according to the revalued value model according to IAS 16 “Fixed Assets”). The resulting difference of CU 200 million is reflected as a revaluation reserve. The excess of an asset's carrying amount over its tax base gives rise to a taxable temporary difference. However, this difference is related directly to equity (revaluation reserve), and not to profit (loss) of the reporting period. 2. Depreciation of production equipment for tax purposes is accrued in an accelerated manner, while for accounting purposes it is calculated in a straight-line manner. As a result, the book value of fixed assets is greater than their tax base. The resulting difference is CU 150 million. is a taxable temporary difference. 3. The difference in the book value and tax base of receivables is caused by the existing reserve for doubtful receivables in the amount of CU 20 million, since, according to tax legislation, this reserve is not included in expenses for tax purposes. Information according to the financial statements on accounts receivable as of the reporting date: Gross accounts receivable CU 300 million.

Provision for doubtful accounts receivable (CU20 million)

Net accounts receivable CU 280 million Thus, the carrying amount of the accounts receivable is less than the tax base, which results in a deductible temporary difference. 4. The amount of accruals reflected in the accounting balance includes: Interest payable CU 30 million.

Fines and penalties CU 100 million

Net accounts receivable CU 130 million Accrued interest is taxed on a cash basis, and the tax base of the liability is zero (because it is equal to the carrying amount of the liability less any amount that will be deductible for tax purposes in respect of that liability in future periods). The tax base of accrued fines and penalties is equal to the book value (i.e., no temporary difference arises), since, according to tax legislation, fines are not recognized as expenses for tax purposes. Thus, a deductible temporary difference arises for this item. 5. The deferred tax liability is presented before settlement, i.e. at the beginning of the period. 6. Retained earnings include accounting profit (net profit calculated according to accounting data before tax) CU 150 million.

Let's calculate the value of ANI and UN at the end of the reporting period. Million d.e.

Let's determine the amounts included as deferred tax income (expense) in the income statement and also attributable directly to capital: Million. d.e.

We will generate information that should be reflected in the profit and loss statement. To do this, you need to know the amount of accounting profit and taxable profit.

Accounting profit (net profit calculated according to accounting data before tax) amounted to CU 150 million. (see note 6). Taxable profit (according to tax accounting data) is equal to CU 233 million. Thus, the current tax expense is CU 56 million. (233 x 24%).

Extract from the profit and loss statement of the ABC company for the reporting period Million. d.e.

Explanation of the relationship between income tax expense and accounting profit Million. d.e.

After calculating the amount of income tax expense in accordance with IAS 12 “Income Taxes”, the balance sheet of the ABC company will take the following form: Balance sheet of the ABC company as of the reporting date, million.

* - balance sheet items that have undergone changes as a result of the application of IAS 12 “Income Taxes”