An enterprise liable to the tax on profit according to the real regime system of taxation including a qualified investment project liable to the tax on profit at the rate of 9 percent, has the obligation to pay a monthly prepayment of tax on profit at the rate of 1 percent of turnover inclusive of all taxes, except Value Added Tax, realized in the previous month. The prepayment will be deducted from the tax on profit at the annual liquidation of the tax. Credit to GDT
Example
ABC Company made revenues ( included any taxes) of $11,000 and expense of $2,000.
Required:
Ignore other information.
1.Calculate Prepayment of Profit Tax (now it is called prepayment of income tax).
2.Tax on profit ( now it is called tax on income )
3. Profit tax payable ( now it is called Income Tax Payable )
Solution
1.Prepayment of Profit Tax (PPT)
PPT base = $11,000/1.1=$10,000 ( amount before 10% VAT)
PPT = 10,000 x 1%=$100
2.Tax on Profit ( Tax on Income ), rate of 20% ( standard rate)
Taxable Profit = Tax revenue – tax expense = 10,000-2,000=8,000$
Tax on profit ( tax on income)=8,000 x 20%=$1,600
3.Profit Tax Payable ( Income Tax Payable)
Profit Tax payable = tax on profit – PPT = 1,600-100=$1,500