2020-09-24
315
1 double taxation A The percentage of income, wealth,
etc., assessed as payable in taxation
2 fiscal accounting B Taxation that falls on the same source
of income in more than one country.
3 gross receipts C A sum of money that you have to pay,
for example as a tax to the
government.
4 levy D The total amount of money received
by a business in a specified period
before any deductions for costs, raw
materials, taxation, etc.
5 net book value E A list of a company's employees and
the amount of money they are to be
paid
6 payroll F The value of an asset as recorded in
the accounts of its owner
7 tax rate G A report that shows how resources are
used
UNIT EXTENSION
Exercise 9. Two-minute presentation.
Choose one of the following subjects about Corporate Profit Tax and prepare to give a two-minute presentation about it to the group.
1 Basic principles of corporate profit tax
2 Corporate tax planning
3 Benefits of corporate tax planning
4 Corporate Profit Tax in the Russian Federation
5 Chapter 25 of the Tax Code and the Corporate Profit Tax
6 Small businesses and the Corporate Profit Tax
7 Corporate Profit Tax for Russian legal entities and foreign legal entities
PART 2
TOPIC FOCUS: Corporate Income Tax
Discuss these questions with a partner.
1. What is Corporate Income Tax?
2. What business organizations are subject to Corporate Income Tax?
3. What is the Corporate Income Tax rate in your country?
4. What is a tax reconciliation?
5. What tax-related information is disclosed in an income statement?
6. What criteria must costs meet to be recognized as tax deductible?
7. On what basis is the amount of advance payment of income tax determined?
8. What general company information does a Corporate Income Tax Return contain?
Since companies are legal entities distinct from their owners, companies themselves are taxed on all profits that cannot be deducted as business expense. A tax designed as a tax on corporate profit (or net profit, net earnings) is known as Corporate Income Tax (UK: Corporation Tax). The role of Corporate Income Tax is to enable taxation of income that would otherwise go entirely untaxed, protected in corporate form.
Generally, all types of legal entities are subject to Corporate Income Tax. Unincorporated entities, (sole proprietorships, partnerships, etc), which are not separate legal entities, are not liable to pay Corporate Income Tax.
From the accounting perspective, corporate profit is the total income of a company minus the costs associated with generating that income. The amount of corporate profit is determined in income statement, a financial document that summarises a company’s revenue and expenses for a fiscal year. Starting from the total revenue (turnover, total sales), income statement deducts all the expenses to arrive at net income (net earnings, net profit), a figure which shows how mucha company actually earned (or lost) during the accounting period. Net income shown in income statement is also called accounting profit. Although the accounting profit is usually not the same as the net profit required for tax purposes, it represents the key information in calculation of taxable profit (taxable income) for Corporate Income Tax.
A part of net income may be distributed to shareholders in form of dividends, while the remaining part (retained earnings) is held in the company to cover the expenses of expansion. Shareholders receiving dividend payments must report them to tax authorities and pay Personal Income Tax on these amounts, which means that dividend payments are taxed twice. Company owners, who are also company directors or employees, must pay Personal Income Tax on salaries and bonuses they earn. However, as these payments are tax deductible, they are taxed only once.
Exercise 1.
In the text, find the answers to the following questions.
1. What is the role of Corporate Income Tax?
2. What financial statement is most important for tax purposes?
3. Why is accounting profit important for tax purposes?
4. How many times are dividends taxed? Why?
Exercise 2. Find a word in the text that matches each definition below. The words appear in order.
1. (two words) Ordinary and necessary expenses incurred in a taxpayer’s business or trade _______________
2. (two words) The amount remaining after all costs, depreciation, interest, taxes, and other expenses have been deducted from total sales _______________
3. (two words) A type of entity with unlimited liability, which is not a separate legal entity from its owner _______________
4. (two words) Total sales _______________
5. (two words) Net income as shown in income statement _______________
6. (two words) The amount of income subject to income tax __________
7. A portion of profit given to a shareholder _______________
8. (two words) A portion of net income retained by a company to be reinvested into its core business _______________
9. Someone who is paid to work for someone else _______________
10. (two words) An amount of money which can be taken away from the total amount of income you must pay tax on. _______________
GRAMMAR FOCUS:
Past Continuous Tense
Exercise 3. You are a head of the tax department in a large accounting firm. Some important documents went missing yesterday at about 10 o’clock. There are six staff in your team and you are suspecting one of them to be responsible. You need to find out what everybody was doing at that particular time. Interview each employee individually and ask about his/her activities, as well as about activities of his/her colleagues.
Example: What were you doing at 10 o’clock yesterday?
§ calculate VAT liability
§ prepare VAT return
§ analyse budget estimates
§ explain the tax impact of the acquisition
§ negotiate an engagement with the client
§ help to implement new accounting procedures
Exercise 4. Text completion.
Read the text and complete it with the following words.
tax return applicable allowances
accounting profit tax reconciliation invoices
tax authorities tax liability tax base
