Taxable Base Compensation and Depreciation Methods
Compensation of Negative Taxable Base
The deadline to compensate is 15 years. Settlements (finance) or reversals (make it yourself) may be offset against positive income (+) of the tax periods ending in the subsequent 15 years. If there is no declaration, there is no compensation.
Example
If a year’s negative amount is not stated, and the next year’s amount is positive and stated, you cannot compensate for the negative result that was not previously declared. However, you can make a later statement.
Example: 2010
Constitution on July 1, 2009, calendar year. At year-end, the loss is €100,000. Again, no installment payment is made. On July 25, 2010, the corporate income tax is presented with a negative taxable base of €100,000, and of course, there has been no installment payment fee.
There is €200,000 in 2010 to declare on July 25, 2011. On April 20, 2011, no partial payments will be made.
In July, the taxable base will be €200,000 – €100,000 = €100,000, and the fee is 30% of €100,000.
Concept and Methods of Determination
General rule: Direct estimation (Income – Expenses)
Objective determination is only used in cases provided by law.
Under the direct estimation method, the taxable base is calculated from the accounting profit, which will be corrected by applying the tax law.
What expenses are not deductible?
Accounting Profit
Indicates the accounting profits or losses obtained by the entity under the rules of the Commercial Code, other laws relating to such determination: the Companies Act and the General Accounting Plan (PGC).
Related Adjustments
Adjustments occur because there are differences between the tax law and the General Accounting Plan. They are practiced on the accounting for the determination of the taxable base and can be positive or negative:
Permanent Differences
- Accounting expenses that are not tax-deductible items.
- Countable income tax items that will never be eligible.
For example, a penalty for failure to pay withholding of €100,000 to workers. That expense is an income, an extraordinary expense item.
Timing Differences
If adjustments are allowed in subsequent tax years, an expense is tax-deductible, and income tax will be computable.
For example, the law allows companies to self-employment amortization of fixed assets during the first 5 years. So, if it is stated that the plant will last 10 years instead of a 10% share, 100% can be written off in the year of investment.
Constitution: January 1, 2009 (calendar year)
Benefit: €90,000
Machinery: €100,000, starting to work on January 1
The law allows writing off 100%. That means there is an expense of €100,000, but €10,000 are already amortized for accounting purposes in the income statement. Then the fiscal adjustment is €90,000.
Fiscal Off-Balance Sheet (Review Differences)
Temporary: Where they have a projection (the future) of more than one year.
Permanent: Only in the tax period in which it occurs.
Value Adjustments: Amortization
The fiscal rule departs from the book. To be tax-deductible, it is required to respond effectively to the concept of depreciation. Effective when the repayment will be made according to any of the depreciation methods provided:
Straight-Line Method According to Tables
Applied to the purchase price or production cost coefficient, which is appropriate for straight-line depreciation tables (tables set in the regulations).
Depreciation Method as a Constant Percentage
This involves applying a constant rate to the outstanding value of depreciation (purchase value – depreciation practice). The constant rate is obtained by weighting the coefficient of linear depreciation as tables with the following parameters:
- > 8 years: 2.5
- 5 to 8 years: 2
- < 5 years: 1.5
The coefficient thus obtained cannot be less than 11%. This method of repayment shall not apply to buildings, furniture, and fixtures.
Depreciation Method According to Digits
The repayment period is chosen, and each annuity digit represents the number of years of life. The sum of these values determines the number of digits. Then, divide the value to repay by the sum of digits obtained to determine the fee per digit. The annual depreciation rate will result from multiplying the fee by the numerical digit corresponding to each period. In this method, buildings, furniture, and fixtures are not eligible.
Depreciation According to a Plan
Submitted by the taxpayer and accepted by the Administration.
There is also depreciation based on real depreciation, according to the amounts justified by the taxpayer.
Accelerated Depreciation
Consists of the amortization of the whole value of the assets in the year that it comes into operation.