Deferred tax (latente belasting)

What does deferred tax mean?

Tax that will be paid or offset in the future because of temporary differences between commercial and tax valuation. Can appear on the balance sheet as a provision (liability) or a receivable (asset).

Temporary differences between commercial and tax carrying amounts can cause future tax payments or benefits. A deferred tax asset may not be recognised without assessing its recoverability. Permanent differences do not give rise to deferred tax.

How does it work?

Deferred tax arises from a temporary difference between the carrying amount of an asset or liability in the annual accounts and its tax carrying amount (RJ 272). If the commercial value of an asset is higher, less is depreciated for tax later and therefore more tax is paid: a deferred tax liability, which the law names as a separate provision (art. 2:374(4)(a) DCC). If the commercial value is lower, or there is an offsettable loss, a deferred tax asset arises.

You recognise an asset only to the extent that future taxable profit is probable. Measurement follows the rates and legislation enacted at the balance sheet date, nominal or at present value.

Example

A BV with € 160.000 profit before tax capitalises € 80.000 of development costs in 2026 and amortises them over four years from 2027. For tax it deducts the costs at once in 2026 (art. 3.30(3) Income Tax Act 2001 (Wet IB 2001)), so taxable profit is € 80.000. Current tax, 19% up to € 200.000 profit: € 15.200. At the end of 2026 the commercial carrying amount is € 80.000 and the tax carrying amount nil; on that temporary difference the deferred tax liability is 19% × 80.000 = € 15.200. Tax charge 2026: 15.200 + 15.200 = € 30.400, or 19% of the commercial profit. In 2027 through 2030, € 3.800 is released each year, because taxable profit is then € 20.000 higher than commercial profit.

In the annual accounts

Deferred asset under assets or deferred liability under liabilities; notes where needed.

Difference from tax payable

The tax payable for the financial year (current tax) is the tax calculated on that year's taxable profit. Provisional assessments paid reduce the tax still to be paid on the balance sheet, not the tax charge. Deferred tax is the amount that will be paid more or less later because commercial and tax valuation now differ. Together, the two form the tax charge in the profit and loss account.

Common mistakes

• Treating every tax difference as temporary
• Entering the future tax rate without checking

What to watch for

• Prepare a schedule per balance sheet item with commercial value, tax value, difference and rate.
• Substantiate a receivable from loss compensation every year with a profit forecast.
• Micro and small entities that apply the tax-based accounting policies (art. 2:396(6) DCC), have no valuation differences and so no deferred taxes on them.

Legal basis and source

art. 2:374 DCC; RJ 272

• Dutch Civil Code, Book 2, article 374
• Dutch Accounting Standards Board (Raad voor de Jaarverslaggeving)
• Dutch Tax Administration: corporate income tax rates
• Income Tax Act 2001 (Wet inkomstenbelasting 2001), article 3.30

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