Loss on „Toxic” Currency Options and Forward Contracts as a Tax-Deductible Expense in Corporate Income Tax – General Issues

Abstract Due to financial crisis many entrepreneurs suffered heavy losses on currency options and forward contracts. Tax authorities tend to disallow deduction of those losses from the taxable income. Many cases ended up in administrative courts, resulting in judicature controversies on the issue in question. This paper is the first of four in a cycle. The aim of the whole cycle will be to analyze deeply these controversies and suggest the proper interpretation of the legal provisions, determining whether losses on currency options and forward contracts should or should not be regarded as tax-deductible expenses. The aim of this paper is to determine the scope of the problems to solve as well as to analyze the legal character of the loss on non-deliverable currency options and forward contracts. Therefore this legal character has been determined in the light of Polish corporate income tax act. What is more, the problems with the interpretation of these losses as indirect deductible expenses have been solved.

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Loss on Non-Deliverable Currency Options or Forward Contracts in Corporate Income Tax and the Notion of Expense Related to Acquisition of a Derivative

Financial Law Review ◽

10.1515/flr-2016-0007 ◽

2016 ◽

Vol 1 (2) ◽

pp. 1-14

Author(s):

Łukasz Karczyński

Keyword(s):

Financial Crisis ◽

Income Tax ◽

Corporate Income Tax ◽

Currency Options ◽

Forward Contracts ◽

Taxable Income ◽

Legal Provisions ◽

Administrative Courts ◽

Proper Interpretation

Abstract Due to financial crisis many entrepreneurs suffered heavy losses on currency options and forward contracts. Tax authorities tend to disallow deduction of those losses from the taxable income. Many cases ended up in administrative courts, resulting in judicature controversies on the issue in question. This paper is the second of four in a cycle. The aim of the whole cycle will be to analyze deeply these controversies and suggest the proper interpretation of the legal provisions, determining whether losses on currency options and forward contracts should or should not be regarded as tax-deductible expenses. The aim of this paper is to determine if the aforementioned losses may be regarded as expenses related to acquisition of these derivatives (excluded from tax-deductible expenses). The conducted analysis suggests that the expenses made to pay the losses cannot be regarded as such expenses, so they should be regarded as tax-deductible expenses if there are no other obstacles.

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Early closeout of derivatives in the light of corporate income tax

Financial Law Review ◽

10.1515/flr-2016-0017 ◽

2016 ◽

Vol 1 (3) ◽

pp. 51-59

Author(s):

Łukasz Karczyński

Keyword(s):

Financial Crisis ◽

Income Tax ◽

Corporate Income Tax ◽

Currency Options ◽

Forward Contracts ◽

Taxable Income ◽

The Third ◽

Legal Provisions ◽

The Law ◽

Proper Interpretation

Abstract Due to financial crisis many entrepreneurs suffered heavy losses on derivatives, mainly currency options and forward contracts. Tax authorities tend to disallow deduction of those losses from the taxable income. Many cases ended up in administrative courts, resulting in judicature controversies on the issue in question. This paper is the third of four in a cycle. The aim of the whole cycle will be to analyze deeply these controversies and suggest the proper interpretation of the legal provisions, determining whether the expenses on currency options and forward contracts should or should not be regarded as tax-deductible expenses. The aim of this paper is to determine if the rights from the derivatives are being exercised or waived (as the law provides) in case of their early closeout (which allows the deduction as well). The conducted analysis suggests that early derivative closeout realises in exercising the rights from the derivative (as the law provides) which allows the deduction.

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Early closeout of derivatives in the light of corporate income tax

Financial Law Review ◽

10.1515/flr-2016-0022 ◽

2017 ◽

Vol 0 (0) ◽

Author(s):

Łukasz Karczyński

Keyword(s):

Financial Crisis ◽

Income Tax ◽

Corporate Income Tax ◽

Currency Options ◽

Forward Contracts ◽

Taxable Income ◽

The Third ◽

Legal Provisions ◽

The Law ◽

Proper Interpretation

Abstract Due to financial crisis many entrepreneurs suffered heavy losses on derivatives, mainly currency options and forward contracts. Tax authorities tend to disallow deduction of those losses from the taxable income. Many cases ended up in administrative courts, resulting in judicature controversies on the issue in question. This paper is the third of four in a cycle. The aim of the whole cycle is to analyze deeply these controversies and suggest the proper interpretation of the legal provisions, determining whether the expenses on currency options and forward contracts should or should not be regarded as tax-deductible expenses. The aim of this paper is to determine if the rights from the derivatives are being exercised or waived (as the law provides) in case of their early closeout (which allows the deduction as well). The conducted analysis suggests that early derivative closeout realises in exercising the rights from the derivative (as the law provides), which allows the deduction.

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Management Of Accrual Components In Response To Corporate Income Tax Rate Changes: Evidence From Korea

Journal of Applied Business Research (JABR) ◽

10.19030/jabr.v29i5.8024 ◽

2013 ◽

Vol 29 (5) ◽

pp. 1421 ◽

Cited By ~ 3

Author(s):

Won-Wook Choi ◽

Hyun-Ah Lee

Keyword(s):

Financial Reporting ◽

Income Tax ◽

Tax Avoidance ◽

Corporate Income Tax ◽

Tax Rate ◽

Taxable Income ◽

Accruals Management ◽

Accrual Management ◽

Aggressive Tax Avoidance ◽

Statutory Tax Rate

Changes in the statutory corporate income tax rate provide firms with an opportunity to reduce their tax burden by shifting their taxable income from higher to lower tax rate years. One negative consequence of shifting taxable income across years is higher variation in book income for financial reporting purposes. Taxable income and book income are closely related in most countries, and, in general, reporting volatile book income across years is not a favorable signal to investors. This study investigates how firms shift taxable income and concurrently mitigate book income fluctuation by managing accrual components separately when the statutory income tax rate changes. Unlike prior studies, we decompose discretionary accruals into two components and examine distinctive patterns of accrual management in Korea, where book-tax conformity is high and aggressive tax avoidance is restricted. We find that firms manage book-tax accruals for taxable income shifting and manage book-only accruals to mitigate book income fluctuation. Furthermore, we find the extent of book-tax and book-only accruals management varies depending on the firms tax and financial reporting costs. The results of this study provide clear and compelling evidence of firms opportunistic accrual management behavior in response to statutory tax rate reduction.

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PENERAPAN PERYATAAN STANDAR AKUNTANSI KEUANGAN NOMOR 46 TENTANG AKUNTANSI PAJAK PENGHASILAN DAN UNDANG-UNDANG NOMOR 36 TAHUN 2008 TENTANG PAJAK PENGHASILAN ATAS PAJAK PENGHASILAN BADAN PADA PT.MEGA JASAKELOLA

GOING CONCERN : JURNAL RISET AKUNTANSI ◽

10.32400/gc.9.1.25211.2014 ◽

2014 ◽

Vol 8 (3) ◽

Author(s):

Ray Marcel Letlora ◽

Jantje J. Tinangon ◽

Lintje Kalangi

Keyword(s):

Analytical Method ◽

Income Tax ◽

Descriptive Analysis ◽

Income Taxes ◽

Corporate Income Tax ◽

Business Services ◽

Taxable Income ◽

Research Results ◽

Deferred Tax ◽

Accounting For Income Taxes

The application of PSAK No. 46, Accounting for Income Taxes expected to bridge between accounting and tax laws with provisions. The purpose of this study is to investigate the application of PSAK No. 46 and Act No. 36 of 2008 on corporate income tax on PT.mega Jasakelola. The analytical method used is descriptive analysis. The application of PSAK No.46 of research results 46 top corporate income tax has been applied on PT.Mega Jasakelola especially regarding deferred tax, taxable income and tax payable now. Implementation of Act No. 36 of 2008 on income tax on business services is appropriate PT Mega Jasakelola Taxation existing regulations. PT.Mega Jasakelola has implemented reporting income tax on their annual tax return, in accordance with the provisions of this is evidenced by the positive correction done at the expense of the non- taxable.

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Tax Administration versus Tax Rates: Evidence from Corporate Taxation in Indonesia

The American Economic Review ◽

10.1257/aer.20201237 ◽

2021 ◽

Vol 111 (12) ◽

pp. 3827-3871

Author(s):

M. Chatib Basri ◽

Mayara Felix ◽

Rema Hanna ◽

Benjamin A. Olken

Keyword(s):

Developing Countries ◽

Income Tax ◽

Corporate Taxation ◽

Corporate Income Tax ◽

Tax Revenue ◽

Tax Administration ◽

Tax Rates ◽

Taxable Income ◽

Elasticity Of Taxable Income ◽

Percentage Points

We compare two approaches to increasing tax revenue: tax administration and tax rates. We show that when Indonesia moved top regional firms into “medium taxpayer offices,” with high staff-to-taxpayer ratios, tax revenue more than doubled. Examining nonlinear changes to corporate income tax rates, we estimate an elasticity of taxable income of 0.579. Combining these estimates, improved tax administration is equivalent to raising top rates on all firms by 8 percentage points. On net, improved tax administration can have significant returns for developing countries. (JEL H25, H26, K34, O17)

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ANALISIS KOREKSI FISKAL DALAM RANGKA PERHITUNGAN PPH BADAN PT. KAWANUA DASA PRATAMA

GOING CONCERN : JURNAL RISET AKUNTANSI ◽

10.32400/gc.9.1.25204.2014 ◽

2014 ◽

Vol 8 (3) ◽

Author(s):

Felix Daniel Wongso ◽

Jantje Tinangon ◽

Stanley Walandouw

Keyword(s):

Income Tax ◽

Accounting Standards ◽

Financial Statements ◽

The State ◽

Financial Accounting ◽

Corporate Income Tax ◽

Financial Reports ◽

Taxable Income ◽

Income Statement ◽

A Company

PT.Kawanua Dasa Pratama is a company which is a resident and as an entity that has the responsibility to calculate, report, and deposit the tax payable to be paid to the State. However, there are problems that will occurred in the payment of taxes. This is due to the particular financial reports, especially income statement have commercial income statement and fiscal income statement. Both of them are distinctly different, from some point of views about Profit Commercial that refers to the Financial Accounting Standards, while referring to the Act Taxable Income - Tax Act applicable. These differences are simply found in the presence of income and expenses are recognized as income or expense by the company but are not recognized by the Tax. These differences require an adjustment or reconciliation so that the amount of corporate income tax payable are calculated by the company and the tax could be alike. The purpose of this study is to determine the fiscal income statement derived from the financial statements of fiscal correction in the commercial. In this study, obtained after correction of the fiscal profit of Rp 2.241.020.568 and had to pay tax of Rp 560.255.142.

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The investment activity of Russian business: Relationships with corporate income tax burden

International Accounting ◽

10.24891/ia.23.7.800 ◽

2020 ◽

Vol 23 (7) ◽

pp. 800-823

Author(s):

A.A. Razuvaeva ◽

N.V. Pokrovskaya

Keyword(s):

Income Tax ◽

Systems Approach ◽

Corporate Income Tax ◽

Federal State ◽

Tax Burden ◽

Return On Assets ◽

Investment Activity ◽

Analysis And Synthesis ◽

Tax Benefits

Subject. This article assesses the role of tax incentives for the Russian business' investment behavior. Objectives. The article aims to identify the relationship between the corporate income tax burden as an indicator responding to tax benefits application and the investment activities of Russian companies. Methods. For the study, we used the methods of analysis and synthesis, and the systems approach. The analysis covers the period from 2012 to 2018. The data of the Russian Federal State Statistics Service, Federal Tax Service of Russia, and the Ministry of Finance of the Russian Federation are the source of information for analysis. Results. The article summarizes the characteristics of the investment activity of the Russian business. However, the article does not reveal any obvious relationship between the income tax burden and the investment activity of the Russian business in the 2010s. There is also no link found between fixed investment and return on assets. Conclusions. The increase in income tax burden in the late 2010s, accompanied by a decrease in profitability, poses a threat to the active investment development of Russian organizations.

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