Hello,
May I kindly ask which rate I should use to calculate deferred tax?
The president approved tax reform (to increase the CIT rate from 19% to 21%) last month (in November 2023 but has not been enacted as of 1 December 2023 but should be a tax rate applicable after 1 December 2024). There is only mere formality to publish the new law in the Collection of Laws.
The applicable tax rate should be 19 % for the next reporting period because it is the CIT rate on the first date of the tax period, i.e., 1 December, which should remain at 19%
We have a subsidiary that has a financial period starting from 1 December 2023. Therefore, the balance sheet date is on 30 November 2023.
The deferred tax is caused mainly by the difference between tax and accounting NBV of fixed assets - deferred tax liability.
The calculation (simulation of tax and accounting depreciation) shows that the difference between tax and accounting NBV will increase next year (due to accelerated tax depreciation, but it should reverse in more distant periods as accelerated tax deprecation drops under accounting depreciation), so I expect that deferred tax liability as at 30 November 2023 should be calculated at a rate of 21% (substantially enacted and applicable after the next reporting period).
Should I use a tax rate of 19% or 21% to calculate the deferred tax from fixed assets (I think 21% because the tax rate is substantially enacted and the manner of recovery will be in periods after the next reporting period - Conversely, I would use a 19% tax rate for differences that will be settled/recovered within 1 year, e.g., untaken holiday, bonuses that were tax-non-deductible at the year-end as at 30 November 2023)?
Thank you very much in advance
