FINAL PROJECT

Training program:
(To be fulfilled by the student)
Subject:
(To be fulfilled by the student)
Send to: [email protected]

Last Name/Surname:
Name:
ID/Passport:
Address:
Region:
Country:
Telephone:
E-mail:
Date:

ENEB Business School

1|Page
 Inter
national
Corporate Tax

2|Page
1. The machinery was acquired for € 52,000 in January 2014. An accounting
depreciation expense of € 7,000 is provided. Fiscally a maximum amortisation
coefficient of 12% and a maximum period of 18 years is established.

Overpaying taxes in one period due to a scheduling discrepancy that results in a

reduction of taxes owed in the period afterward is represented on the balance sheet by
the deferred tax advantage. Deferred tax liability is a counter balance sheet item to
deferred tax asset since it reduces tax in one period due to a temporary timing
mismatch but increases tax in the next. Short-term disparity occurs when expenses are
not deductible in the current tax quarter but are rectified in the subsequent tax period.

Given the existing situation,

Accounting-approved depreciation is $7,000.

For tax purposes, however, depreciation amounts to $6240 (52000 * 12%).

If the variance equals $760 (7000 – 6240), then the disparity is likely to be temporary.

This distinction is an advantage in the form of a deferred tax benefit that is realised and
reduced in the subsequent tax cycle.

2. The transport element or vehicle was acquired on January 1, 2013, with a price
of € 25,000 and a useful life of 5 years. The accounting amortisation is carried
out using the method of decreasing digit numbers.

Opening Digits Depreciatio Closing

Year Balance Decreasing n Balance
201
3 25000 5 8333 16667
201
4 16667 4 6667 10000
201
5 10000 3 5000 5000
201
6 5000 2 3333 1667
201
7 1667 1 1667 0

According to the legislation governing corporate taxes, it is permissible to

depreciate a car using the straight-line approach, in which case the annual
amount of depreciation is set at 5,000 Euros. However, at the conclusion of the
first year, the value according to the tax-based standards is 20,000 Euros, but
the value according to the accounting-based standards is 166,67 Euros. On the
other hand, once the period of time that is helpful has passed, this difference
will be null.

3. Provision of € 1,250 is provided for a debt that occurs on October 1, 2016. The
liability has not been claimed judicially.

3|Page
 The provision for expenditure of €1,250 for something that is not yet judicially
claimed is not a taxable expense. Hence, it will be added back in the income
statement which will increase the taxable profits of the company. Therefore, this
will increase the tax of the company.

4. A provision for insolvencies of € 3,000 is provided, an obligation that has

already been judicially claimed.

The provision for insolvencies of €3,000 is judicially claimed at the moment of the
accrual of the tax. Therefore, this will be treated as a deductible expense for the
company. Hence, this expense would reduce the taxable profits of the company and in
turn reduces the tax liability of the company.

5. The administrators have been paid for the performance of senior management
functions with € 10,000.

Live performances of performing and musical arts are 20% deductible. In this situation,
the deductible basis is the direct artistic, technical, and commercial costs, less any
subsidies.
In the current scenario, the deductible expense for tax purpose would be €10,000*20%
= €2,000.

6. An administrative penalty of € 600 has been imposed on the company.

The company's admin charges were fined €600. m This amount isn't tax-exempt, so it
won't lower the tax baseline. Accounting profit and tax profit differ. Deferred tax assets
and obligations won't benefit.

7. The company has paid the posters for a sports conference for its employees.
This serves to advertise their products and services and has cost € 1,200. The
company gave the customers who attended the event a batch of products worth
€ 2,200. Extraordinarily, he has given his employees an assortment of products
worth € 400.

 The company spent 1,200 euros to have banners printed for a sporting event so
that its employees could sell the company's merchandise. The banners were to
be displayed by the employees at the event. However, despite the fact that this

4|Page
 item is connected to profits and would be subtracted from them in the income
statement, there will be no repercussions, either short-term or long-term, as a
result of this change.

 In addition, the business presented consumers who came to see the rally with a
variety of items that had a total worth of € 2,200. This can be treated as sample
distribution This expense will be subtracted from the revenue statement under
advertisements, but it is allowed only upto 50%; Therefore, 50% of 2200 would
be allowed as tax benefit for the company.

8. The company is entitled to a deduction for having made investments affected to

R & D of € 1,200.
The business organisation is qualified to receive a credit of € 1,200 for Research
and innovation. That suggests that the company has submitted a claim for a tax
deduction related to the year in which the investment was made. This indicates
that the tax basis for the asset class is zero, and that the carrying value is greater
than their tax base. Because of the Taxable Interim Differences, the company is
required to establish a Deferred Tax Assets because the corporation's Carrying
value is higher than the Tax Base.

9. The company has made instalment payments of € 4,400.

The firm has paid instalment fees totaling €4,400, which will have no effect on its
ability to get a Company Tax base because it will not have any immediate or lasting
effect. It's a loan repayment, thus the interest portion will be added to the profitably
allocated interest expenses, and the principal portion will be subtracted from the
outstanding loan total.

5|Page
1. Calculate the liquidation of the Corporate Tax in a word document,
using the following scheme.:

Accounting result 100000

+/- Permanent differences
Interest on municipal bond -15000
Penalty charges 9000
+/- Temporal differences
Depreciation as per accounting 8000
Depreciation as per Tax law -12000
- Set-off for tax bases from previous
-30000
tax years.
Tax Base 60000
tax rate 30%
Tax 18000
- Tax deductions, bonuses and
3000
other withholdings
- Withholdings and part payments 5000
Tax difference 10000

As mentioned in the CFI's taxation overview, the variance in bookkeeping for

taxes among financial statements as well as tax returns causes permanent and
transitory inconsistencies in tax expenses on the statement of income. These
discrepancies might be either permanent or temporary. The accounting
information will reflect that a tax payment was made, but the tax return will
determine the actual amount of tax that was paid. This guide will look at the
effects that these permanent and temporary differences in tax accounting have
on the subject matter. The difference between the amount of tax that must be
paid and the amount of tax that was paid is an example of a permanent
variation. This disparity is caused by a factor that does not shift over time. To
put it another way, the division between accounting for financial purposes and
accounting for tax purposes has never been eliminated. A change that is going
to stick around is represented by a fine. Although tax regulations rarely allow for
a deduction for a fine, penalties are typically deducted from revenue when
books are being kept. Discrepancies that are only temporary exist between
pretax book earnings and taxable income and are expected to be rectified or
eliminated in the near future. To put it another way, transactions that produce

6|Page
transitory differences are recorded by both financial reporting and tax
accounting, albeit at separate periods. This is because financial reporting and
tax accounting are two distinct types of accounting. As a result of this,
temporary differences are frequently referred to as periodic variation.

2. North S.L. is thinking of making an international expansion. However, you

need to determine whether to start big in a new market or expand into a
potentially large market, but at a slower and safer pace. The options that the
company's management has are:

a. Enter the North American market, where it is known that their services
can work, but they do not know in depth. They can enter through
Canada and expand across the United States or vice versa.

Attempting to break into the lucrative market in North America, where its services have
a reputation for being successful To fulfil the requirements of a specific client in
particular, it was necessary to make a few straightforward adjustments here and there.
It is essential to conduct research about the management and sales practises of rival
companies. Increased visibility, such as through market ads or advertising, could
potentially attract similar individuals. Customers have the opportunity to receive special
deals, gift cards, and other presents on key events such as the day the product is
launched or during festivals. Seeking for potential new customers to work with.
Individualized attention was provided to each and every customer, and the personnel
was both informed and experienced. Both the quantity and the quality of the goods
have to be adequate. The opinions of the customers should be considered. After
successfully targeting one region with a service or product, businesses have the ability
to expand their operations into several regions.

b. Open slowly but firmly in the Portuguese-speaking market. Due to its

proximity, they know the Portuguese market perfectly, and this would
allow North S.L. access to the Brazilian market, a country with a
thriving economy.
To find out which option is more beneficial for North S.L., compare the
possibilities that arise and justify which of the two is better, considering
which country offers better fiscal conditions and that North S.L. seek the
most significant benefit.

7|Page
 The success of the market hinges on whether or not: It knows its products and its
customers. It has a pleasant texture and drapes nicely.
We must have a product or service line established, as well as manufacturing and
distribution channels. There will be more people to oversee, more customers to
attend to, and fresh rivals to outmanoeuvre. Collect information from customers.
Make more plans to hang out with friends and family.

Considering this analysis, it can be said that option B has more upsides to option A.

Option Bis the safer bet because the company already has an established
presence there and can expand into the market gradually. Although the growth plan
in Option A appears favourable, it is not risk-free.

References:
taxsummaries.pwc.com. (n.d.). Spain - Corporate - Taxes on corporate income. [online]
Available at: https://taxsummaries.pwc.com/spain/corporate/taxes-on-corporate-
income#:~:text=Corporate%20%2D%20Taxes%20on%20corporate%20income.

8|Page