For many of you, corporate tax became real on January 1, 2024.
Your fiscal year, or what your corporate tax year is being called by the relevant authorities, might not be a calendar year. That information is in your formation documents. Check them. Register for corporate tax. If you do not know where to do it or how to do it, ask for help.
Technically, you do not need to register until the day you have to submit your corporate tax return. That will not be until 2025 at the earliest.
However, do not wait to register, believing that you can submit your tax return on the same day.
You need to prepare and review your fiscal year accounts before filing and you must know for certain when that year is.
Here, I would like to look at deferred taxation. Your accountant knows that the same figure can come in different ways, depending on how you are approaching it. I am not suggesting anything fraudulent; this is all about treatment.
Financial accounting tells you how much you invoiced. Management accounting tells you how much you can recognise in a reporting period. Value added tax demands that such invoicing is conducted under legislation for time of supply rules.
From June 1, 2023 corporate tax has its own accounting perspective.
Part of this accounting perspective is known as either a permanent or a temporary difference. It is possible to have both in the same reporting period. Accountants call these deferred tax assets (DTAs) or deferred tax liabilities (DTLs).
As a business owner, you are going to have to become conversant with these terms. Otherwise, you risk losing control of your financial understanding of your entity.
Permanent differences are those items that are included for accounting profits but not for your corporate tax computation. For example, half of your entertainment expenditure is not allowable, therefore is permanently excluded. In terms of understanding, this is the more straightforward of the two.
Meanwhile, temporary differences are what cause deferred taxation. These are the differences between what your accounts say an asset or liability is worth and what the tax law says its worth at a point in time.