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TABLE OF CONTENTS CHAPTER I GENERAL PROVISIONS CHAPTER II TAX BASE CHAPTER III TEMPORARY DIFFERENCES CHAPTER IV RECOGNITION CHAPTER V MEASUREMENT CHAPTER VI PRESENTATION CHAPTER I GENERAL PROVISIONS Article 1. For the purpose of regulating the recognition and measurement of enterprise income taxes, and the presentation of relevant information, these Standards are formulated in accordance with the Accounting Standards for Enterprises-Basic Standards. Article 2. The "income taxes" as mentioned in these Standards includes all types of domestic and overseas tax amounts based on the amounts of taxable income. Article 3. These Standards do not involve the recognition and measurement of government grants, but the temporary difference of income tax arising from government grants shall be recognized and measured in accordance with these Standards. CHAPTER II TAX BASE Article 4. Where an enterprise obtains any asset or liability, it shall determine its tax base. The difference between the carrying amount of the asset or liability and its tax base, the deferred income tax asset or the deferred income tax liability shall be determined according to these Standards. Article 5. The "tax base of an asset" refers to the amount which may be deducted from the taxable benefits when the amount of taxable income is calculated in accordance with the tax law provisions during the course of the enterprise' recovering the carrying amount of the asset. Article 6. The "tax base of an liability" refers to the carrying amount of a liability less the amount of the amount of taxable income to be calculated in the future period which can be deducted pursuant to the tax law. CHAPTER III TEMPORARY DIFFERENCES Article 7. The "temporary difference" refers to a difference between the carrying amount of an asset or liability and its tax base. For an item not recognized as an asset or liability, if its tax base can be determined in accordance with the tax law, the difference between the tax base and its carrying amount is a temporary difference as well. Based on the effects of temporary differences on the future taxable amounts, the temporary differences are classified into taxable temporary differences and deductible temporary differences. Article 8. The term "taxable temporary difference" refers to a temporary differences that will result in taxable amounts in the future when the carrying amount of the asset is recovered or the liability is settled. Article 9. The term "deductible temporary difference" refers to a temporary difference that will result in amounts that are deductible in the future when the carrying amount of the asset is recovered or the liability is settled. CHAPTER IV RECOGNITION Article 10. An enterprise shall recognize the accrued income tax of the current period and prior periods as a liability and shall recognize the part of the income tax already paid in excess of the payable amount as an asset. Where there is any taxable temporary difference or deductible temporary difference, it shall be recognized as a deferred income tax liability or deferred income tax asset in pursuance of these Standards. Article 11. Except for the deferred income tax liabilities arising from the following transactions, an enterprise shall recognize the deferred income tax liabilities arising from all taxable temporary differences: (1) The initial recognition of business reputation; (2) The initial recognition of assets or liabilities arising from the following transactions which are simultaneously featured by the following: (a) The transaction is not business combination; (b) At the time of transaction, the accounting profits will not be affected, nor will the taxable amount (or the deductible losses) be affected. The deferred income tax liabilities arising from the taxable temporary differences relating to the investments of subsidiary companies, associated enterprises and contractual enterprises shall be recognized in accordance with Article 12 of these Standards. Article 12. The taxable temporary differences relating to the investments of subsidiary companies, associated enterprises and joint enterprises shall recognized as corresponding deferred income tax liabilities, however, excluding those that simultaneously satisfy the following conditions: (1) The investing enterprise can control the time of the reverse of temporary differences; and (2) The temporary differences are unlikely to reverse in the excepted future. Article 13. An enterprise shall recognize the deferred income tax liability arising from a deductible temporary difference to the extent of the amount of the taxable income which it is most likely to obtain and which can be deducted from the deductible temporary difference. However, it shall not recognize the deferred income tax assets arising from the initial recognition of assets or liabilities in a transaction which is simultaneously featured by the following: (1) This transaction is not business combination; and (2) At the time of transaction, the accounting profits will not be affected, nor will the taxable amount (or the deductible losses) be affected. On the balance sheet date, if there is any exact evidence showing that it is likely to acquire a sufficient amount of taxable income in a future period to offset against the deductible temporary difference, the deferred income tax assets unrecognized in prior periods shall be recognized. Article 14. For the deductible temporary difference relating to the investments of the subsidiary companies, associated enterprises and joint enterprises, the enterprise shall recognize the corresponding deferred income tax assets for those that meet the following requirements: (1) The temporary differences are likely to be reversed in the expected future; and (2) It is likely to acquire any amount of taxable income that may be used for deducting the deductible temporary differences. Article 15. For any deductible loss or tax deduction that can be carried forward to the next year, the corresponding deferred income tax asset shall be determined to the extent that the amount of future taxable income to be offset by the deductible loss or tax deduction to be likely obtained. CHAPTER V MEASUREMENT Article 16. On the balance sheet date, the current income tax liabilities (or assets) incurred in the current period or prior periods shall be measured on the basis of the expected payable (refundable) amount of income tax, which is calculated according to the tax law. Article 17. On the balance sheet date, the deferred income assets and deferred income tax liabilities shall be measured at the tax rate applicable to the period during which the assets are expected to be recovered or the liabilities are expected to be settled. If the applicable tax rate changes, the deferred income assets and deferred income tax liabilities which have been recognized shall be re-measured, excluding the deferred income tax assets and deferred income tax liabilities arising from any transactions or events directly recognized as the owners' equities, the amount affected by them shall be recorded in the income tax expenses of the current period during which the change occurs. Article 18. The measurement of deferred income tax assets and deferred income tax liabilities shall reflect the effects of the expected asset recovery or liability settlement method on the income tax, i.e., the tax rate and tax base, which is adopted at the time of measurement of the deferred income tax assets and deferred income tax liabilities, shall be identical with those expected asset recovery or liability settlement method. Article 19. An enterprise should not discount any deferred income tax asset or deferred income tax liability. Article 20. The carrying amount of deferred income tax assets shall be reviewed at each balance sheet date. If it is unlikely to obtain sufficient taxable income to offset against the benefit of the deferred income tax asset, the carrying amount of the deferred income tax assets shall be written down. Any such write-down should be subsequently reversed where it becomes probable that sufficient taxable income will be available. Article 21. An enterprise' income tax of the current period and deferred income tax shall be treated as income tax expenses or incomes and shall be recorded in the current profits and losses, excluding the income taxes incurred in the following circumstances: (1) The business combination; and (2) The transactions or events directly recognized as the owner's equities. Article 22. The income tax in the current period and deferred income tax relating to the transactions or events directly recorded in the owner's equities shall be recorded in the owner's equities. CHAPTER VI PRESENTATION Article 23. The deferred income assets and deferred income tax liabilities shall be respectively presented in the non-current assets and non-current liabilities in the balance sheet. Article 24. The income tax expenses shall be presented separately in the profit statement. Article 25. An enterprise shall, in its notes, disclose the following information relating to the income tax: (1) The main constituent parts of the income tax expenses (incomes); (2) A description about the relationship between the income tax expenses (incomes) and the accounting profits; (3) The amounts of deductible temporary differences or deductible losses of unrecognized deferred income tax assets (if there is a date due, it shall disclose the date due); (4) Each category of temporary difference and deductible loss, the amount of the deferred income tax assets or deferred income tax liabilities which are recognized during the presentation period, the basis for the recognition of the deferred income tax assets; and (5) For any deferred income tax liabilities which have not been recognized, the amounts of temporary differences relating to the investments of the subsidiary companies, associated enterprises and joint enterprise. |
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