Which presentation to choose for your tax proof?

Which presentation to choose for your tax proof?

Presentations for tax proof are in practice very diversified, from very concise to more detailed, as they are not regulated. Most of the time, the information is presented according to one of the following schedules:

  • Value
  • Percentage
  • Value and percentage

The result before tax, which serves as the theoretical basis for tax calculation is not always the same:

  • Consolidated earnings before taxes,
  • Earnings before taxes of the integrated companies (before share results of the companies using the equity method),
  • Earnings before taxes of the continuing activities,
  • Earnings before taxes and amortization/depreciation of goodwill, which results in a different presentation of the elements used for reconciliation.

The tax rate that needs to be retained is the rate of the consolidated company, leading to obtaining the effect of the tax difference on the tax amount in the reconciliation. However, some groups that are internationally present, make use of a weighted average tax rate to calculate the theoretical tax amount. Accordingly, the effect of the tax rate difference does not appear in the reconciliation process for their tax proof.

The importance of tax proof

Tax proof, that is…

  1. A tool that allows to detect errors in the amount of the payable tax: we can easily verify with one calculation the result of complex/badly controlled operations when the tax calculation is relocated.
  2. A tool to decrypt the tax policy of the group. The tax proof is a tool of financial communication, certainly regarding the auditors and investors.
  3. A tool to optimize the tax policy of a group.
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