Taxation

[Zu17]

Dear All,

I need help, actually in my country, the income tax act provides that income are taxed at 15%. However when income are generated from exports tax is at 3%.

What would be my tax rate for current tax and deferred tax computations?

If my current tax rate is 15%, how would I treat that reduced taxed income portion?

Thanks for response!!

[JRSB]

if your business is only doing export business then maybe perform the reconciliation against 3%. you don't have to use the headline rate in your country.

if it's a mix then a reconciling item might be the effect of reduced rate on export profits.

for deferred tax, same question really...what are you forecasting to actually utilise any losses against...ie what will they actually be worth 3%, 15%, a combination....

[Zu17]

Hello

Thanks for the response.

1. It is a mix, so in my income tax recon I start start with tax at 15% and post difference as “Effect of tax credit”?

2. I agree with you, but I think for this one there might be an accounting policy choice as IAS 12 is not that clear on how to treat tax credit or reduced rate of tax. I feel doing a mix would complicate things. Rather, I would take the 15% itself instead of mix. Agree?

[Marek Muc]

You need to estimate an effective tax rate that will be applicable to your company and use this rate when measuring deferred tax (see IAS 12.49)