How to handle annual adjustments in the tax field?
The annual adjustment account is a very good tool for adjusting temporary accounts. These accounts are usually left over from the previous year and are so important that their effects should be known this year. But it is not only the adjustment of the accounts that is important and the reflection of the tax effects is more important. Therefore, the accountant of a group should know the capability of tax reflection in addition to the implementation of annual adjustments. Any adjustment in transactions such as buying and selling will definitely be effective in other tax systems except for offices. For example, if you adjust the previous year’s purchase invoice in the current year’s accounts, you must definitely enter it in the VAT system and the statement of transactions. Edit seasonally.
The annual adjustments account (accumulated profit and loss) can be debited or credited during the current period, the tax officers will take the mentioned account and the related documents during the investigation and while checking the correctness of the related calculations, they will act in compliance with the following regulations:
The debit items of the mentioned account, if they cause a decrease in the declared taxable income, will be returned and added to the taxable income of the performance under consideration, with the exception of the following cases:
1- Items related to the expenses of previous years (in case of compliance with Articles 147 and 148 of the Direct Taxes Law), provided that they are not related to income subject to tax exemption or withholding tax, or the taxable income of the relevant year has not been determined through Al-Ras be It is obvious that if a part of the income of the relevant year is exempt or subject to withholding tax, the expenses will be shared in proportion to the income in accordance with the regulations.
2- Items related to returns from sales and discounts or sales amendments based on relevant documents, provided that they are not related to exempt or withholding tax revenues.
The creditor items of the mentioned account are added to the taxable income of the year in question, except for the following
1- Items that have been added by the tax department to the taxable income of previous years.
2- Incomes that were exempted from paying taxes in the relevant years. (It will be noted that in cases where the basis for calculating the exemption was declared income, in this case, it will be taxable due to non-declaration in the relevant year.)
3- Income subject to withholding tax. (If the tax belonging to the aforementioned incomes has not been claimed or paid in the implementation of the relevant legal regulations, it should be claimed in accordance with the regulations.)
4- Items related to the return of expenses that the taxpayer was exempted or taxed at a flat rate in the relevant period (expenditure recognition year)
In the following cases, offices may face challenges!
1- The debit items of the annual adjustments account have no effect on the taxable income of the considered period.
2- The creditor items of the annual adjustments account, if they are related to the return of the expenses of the previous years and are accepted as tax acceptable expenses in the relevant year, they will be added to the taxable income of the year in question.
3- The creditor items of the annual adjustments account that are related to the income account, if in the relevant year the taxable income is accepted as an acceptable tax expense through the examination of the determination books and the expenses related to the mentioned income items in that year, in this case The total income included in the creditor of the annual adjustments account should be added to the taxable income of the year under consideration, otherwise, by applying a coefficient to determine the taxable income, the desired income will be added to the taxable income of the year under consideration.
Financial Tax Group of Iran Consultants Authority
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This post is written by Arambnamkhda