IAS 12 – INCOME TAXES
Normal Tax Process
31 Dec 31 Dec 31 Dec
30 Jun 28 Feb 31 May 31 Oct
2010 2011 2012
2011 2012 2012 2012
Year-end Year-end Year-end
First Second Company SARS sends SARS settles
provisional provisional estimates tax assessment the ref und to
tax payment tax payment taxable – they calculate the company
of R25 000 of R30 000 income of taxable income
R100 000 as R150 000
and submits
tax return
Step 1: 30 June 2011 Dt Tax payable (SFP) 25 000
Ct Bank (SFP) 25 000
(1st provisional payment)
31 Dec 2011 Dt Tax payable (SFP) 30 000
Ct Bank (SFP) 30 000
(2nd provisional payment)
Step 2: 31 Dec 2011 Dt Tax expense (P/L) 28 000
Ct Tax payable (SFP) 28 000
(Tax estimate for 2011 tax
year – 100 000 x 28%)
Step 5: 31 May 2012 Dt Tax expense (P/L) 14 000
Ct Tax payable (SFP) 14 000
(Under-provision for 2011 tax
year – (42 000 – 28 000))
Step 6: 31 Oct 2012 Dt Bank (SFP) 13 000
Ct Tax payable (SFP) 13 000
(Refund received from SARS
for 2011 tax year)
(25 000 + 30 000 = 55 000)
(55 000 – 42 000 = 13 000)
, Income tax liability (SFP)
Bank (SFP) 25 000
1st provisional payment
Bank (SFP) 30 000
2nd provisional payment
Tax expense (P/L) 28 000
tax estimate
C/B 27 000
55 000 55 000
O/B 27 000
Tax expense (P/L) 14 000
under-provision
Bank (SFP) 13 000
Final refund from SARS
27 000 27 000
Penalties and Fines
Dr Penalties (P/L) 20 000
Cr Income tax payable (SFP) 20 000
Penalties charged for the 2011 tax year
Dr Interest expense (P/L) 4 000
Cr Income tax payable (SFP) 4 000
Interest charged for the 2012 tax year
Tax Base of an Asset (Par 5)
Amount deductible for tax purposes (CP – Accumulated wear and tear/building
allowance) UNLESS:
Those benefits are NOT taxable: then TB = CA
Tax Base of a Liability (Par 8)
CA less amount deductible in the future periods
Income Received in Advance -> Tax Base = CA less Amount of revenue that will NOT be
taxable in the future
Tax Base if not an Asset or Liability (Par 9)
E.g. Research costs
Accounting – CA in SFP = R nil (expense in P/L in year occurred)
Tax purposes
- Only later allowed as deduction
- Tax base of research cost = amount deductible in future for tax purposes
Normal Tax Process
31 Dec 31 Dec 31 Dec
30 Jun 28 Feb 31 May 31 Oct
2010 2011 2012
2011 2012 2012 2012
Year-end Year-end Year-end
First Second Company SARS sends SARS settles
provisional provisional estimates tax assessment the ref und to
tax payment tax payment taxable – they calculate the company
of R25 000 of R30 000 income of taxable income
R100 000 as R150 000
and submits
tax return
Step 1: 30 June 2011 Dt Tax payable (SFP) 25 000
Ct Bank (SFP) 25 000
(1st provisional payment)
31 Dec 2011 Dt Tax payable (SFP) 30 000
Ct Bank (SFP) 30 000
(2nd provisional payment)
Step 2: 31 Dec 2011 Dt Tax expense (P/L) 28 000
Ct Tax payable (SFP) 28 000
(Tax estimate for 2011 tax
year – 100 000 x 28%)
Step 5: 31 May 2012 Dt Tax expense (P/L) 14 000
Ct Tax payable (SFP) 14 000
(Under-provision for 2011 tax
year – (42 000 – 28 000))
Step 6: 31 Oct 2012 Dt Bank (SFP) 13 000
Ct Tax payable (SFP) 13 000
(Refund received from SARS
for 2011 tax year)
(25 000 + 30 000 = 55 000)
(55 000 – 42 000 = 13 000)
, Income tax liability (SFP)
Bank (SFP) 25 000
1st provisional payment
Bank (SFP) 30 000
2nd provisional payment
Tax expense (P/L) 28 000
tax estimate
C/B 27 000
55 000 55 000
O/B 27 000
Tax expense (P/L) 14 000
under-provision
Bank (SFP) 13 000
Final refund from SARS
27 000 27 000
Penalties and Fines
Dr Penalties (P/L) 20 000
Cr Income tax payable (SFP) 20 000
Penalties charged for the 2011 tax year
Dr Interest expense (P/L) 4 000
Cr Income tax payable (SFP) 4 000
Interest charged for the 2012 tax year
Tax Base of an Asset (Par 5)
Amount deductible for tax purposes (CP – Accumulated wear and tear/building
allowance) UNLESS:
Those benefits are NOT taxable: then TB = CA
Tax Base of a Liability (Par 8)
CA less amount deductible in the future periods
Income Received in Advance -> Tax Base = CA less Amount of revenue that will NOT be
taxable in the future
Tax Base if not an Asset or Liability (Par 9)
E.g. Research costs
Accounting – CA in SFP = R nil (expense in P/L in year occurred)
Tax purposes
- Only later allowed as deduction
- Tax base of research cost = amount deductible in future for tax purposes
