Tax advisor: Deferred taxes, what is their meaning and what information is essential for SMEs and entrepreneurs?

Deferred taxes are an accounting resource regulated by international accounting standards, with the purpose of aligning the tax effect and the accounting effect in financial reporting. These taxes provide companies with the ability to adjust their financial statements for technical and accounting purposes.

According to International Accounting Standard No. 12, deferred taxes are those that result from recognizing taxes that a company will have to pay or refrain from paying in the future. The disparity between what the company expects to pay or recover in the future and the current accounting impact is known as deferred tax.

To calculate deferred taxes, the company’s financial statements are compared with the income tax return filed at the relevant time. The resulting disparities are reflected in the category “Deferred taxes” in the company’s financial statements.

Two main types of deferred taxes are distinguished: liabilities and assets. Deferred tax liabilities arise when a company earns income in the current period, but cannot recover it in the present, and must do so in the future. Deferred tax assets arise when a company experiences losses in the current period and is not required to pay taxes on the income until after the income tax return.

The generation of deferred taxes arises for a variety of reasons, ranging from subtle discrepancies between the financial statements and the tax return to miscalculations in the tax settlement. These discrepancies are identified and categorized as deferred assets or liabilities, according to their nature.

For the calculation of deferred taxes, the time account method approach is used, which divides the financial basis by the taxable income, and then multiplies this result by the corresponding tax rate.

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