Question

who would declare tax credit? What is tax credit ? Why it is important How do you claim tavo credit? When can you clann crecht

Answer 1

1. Company incurring accounting losses
2. Tax saved when accumulated losses is set off against gains thereby reducing tax liability
3. It is important to manage cash flows, profits, tax liabilities in an effective way
4. Once the company generates profits, the accumulated losses are set-off and tax is levied on on balanced profit thereby reducing tax liability.
5. Once the entire accumulated liabilities are set-off

E.g. Lets say company as incurred losses of $20mn and $30mn in year 1 and 2 respectively and profit of $15mn and $45 mn in year 3. Also, lets assume tax rate is 30%

Since year 1 and 2 are losses, no taxes are levied and accumulated losses in two years is $50mn. In years 3, when the company generates profit, losses will be set-off. Since accumulated losses are higher than profits, no taxes are levied. Thus at the end of year 3, accumulated losses are $35 mn ($20mn + $30mn - $15mn). In year 4, this amount is adjusted against profits and taxes are levied on balance of $10mn ($45mn - $35mn) @30% i.e. $3mn

Hope this helps