Another common problem is where no mention is made of items which do not require any adjustment. Taxation of banking business 10 Taxation of insurance companies – General business 11 Withholding tax on premium payments 11 Life insurance business 11 Taxation of retirement funds 11 Payments sourced from Ghana 11 Income attributable to a permanent establishment12 Branch profit tax 12 Relief from double taxation 12 Double tax treaties 12 You … Your adjusted taxable income (ATI) affects your entitlement to any dependant tax offset. The same wording will apply in FTX-SGP and TX-VNM (F6), as above in TX-UK (F6). The system of profit premiums entered into force on 1 January 2018 and enables employers to have their employees participate in the company’s profit, in a tax and social security friendly way, without them participating in the capital of the company. Where a question requires the adjustment of profits, and candidates are told in the requirement to follow this approach, they will not be able to obtain full marks if the layout/approach suggested here is not followed. Therefore, if the profits of the company were £10,000 after adding back depreciation, then £3,000 would be deducted to produce taxable profits of £7,000. There are obviously marks available for adjusting items that require adjustment, but also marks for making no adjustment where an adjustment is unnecessary. Here we look at some of the more common adjustments below: When calculating business profits there are a number of costs that the business suffers in any given year which, although should be deducted when calculating profits for accounting purposes, need to be added back to determine taxable profits. The income taxes for the 2004 taxation year were adjusted to reflect the elimination of this provision for additional tax. Please fill in the form below and we'll get back to you. As a general rule entertaining clients (or potential clients), as well as general business contacts, is not an allowable expense for tax purposes and needs to be added back to the accounting profits to calculate taxable profits of a company. Persons, including corporations, partnerships, trustees and bodies of persons carrying on any trade, profession or business in Hong Kong are chargeable to tax on all profits (excluding profits arising from the sale of capital assets) arising in or derived from Hong Kong from such trade, profession or business. Where a question requires the adjustment of profits, candidates will be told in the requirements what figure to start their computation with (normally the net profit figure for an unincorporated business, or the profit before taxation figure for a limited company). Taxation: The taxation is calculated on PBT, and the geographical location of the country determines the rate of taxation. We’ve used days but you can use any reasonable basis, for example months or weeks. In this case, your tax computation will show disallowable items to be added back as "Nil" and the adjusted profit/loss amount will be the same as the net profit/loss as per your financial statements. For example, if the business had made a taxable loss of £2,000 in the previous period which was carried forward and £10,000 of taxable profits in the current period, the overall taxable profits would be £8,000. As such these need to be added back to profits when computing taxable profits. Annual Investment Allowance / Capital Allowances. For tax purposes you would take the accounting profit then deduct the Annual Investment Allowance in order to arrive at taxable profits. We’ll be using the actual tax paid during the period, so for now we use the pre-tax profit figure. This approach has been adopted so that candidates avoid wasting time, and to help them score full marks. Based on Question 2 from the TX-UK (F6) exam from June 2009, answers should, therefore, be presented as in Table 1. If, for example, accounting profits were £10,000 in a given accounting period, with £1,000 of client entertaining, the taxable profits for that period would be calculated at £11,000 – assuming no other adjustments were required. The global body for professional accountants, Can't find your location/region listed? This again makes marking very difficult as it is not clear if such items have been considered or simply forgotten, and means that candidates may not gain as many marks as they would have if a better approach had been adopted. One of the most common questions we get asked is why the profit per the accounts differs from the taxable profit, whether a sole trader, partnership or a company. Every year the return is furnished to the income tax department for the previous year in the assessment year. Taking the above gifts and donations as an example, a typical approach would have been to include £2,300 in the adjusted profit computation, and then to support this with a set of explanatory notes. Taxes provide the most important revenue source for the Government of the People's Republic of China.Tax is a key component of macro-economic policy, and greatly affects China's economic and social development. ACCA F6 Tax adjusted Trading Profit Free lectures for the ACCA F6 Taxation UK variant Exams. We use ATI to work out if: you can include a base amount in the zone or overseas forces tax offset (item T4) you can claim the invalid and invalid carer tax offset (item T5) your child is considered a dependant for Medicare levy purposes (item M1) you are entitled to government super contributions (item A3). Problem is where no mention is made of items which do not require any adjustment ( SECTION 10 PPTA Background. Fill in the period, so for now we use the pre-tax figure... 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