Is my provisional corporate income tax assessment the tax charge?

Short answer

No. The provisional assessment is an advance payment. Calculate the tax charge and set off advances paid to arrive at the remaining tax position.

Basis: art. 2:362 and 2:375 DCC

How do you calculate the Vpb charge?

A provisional corporate income tax (Vpb) assessment is based on an estimate and may differ from the tax on the actual annual result. You cannot therefore simply take the instalments paid as the final tax charge. Prepare a calculation of the tax position and reconcile it with assessments and payments per financial year.

Start with the commercial result and determine which tax adjustments are needed. Not every commercial cost item is tax deductible, and some tax facilities have no direct equivalent in the profit and loss account. With a fiscal unity or loss relief, the calculation becomes more complicated. Use the rates and rules of the tax year concerned, not automatically those of the year in which you prepare the annual accounts. Have the calculation reviewed by an expert when special items are involved. The aim is a substantiated estimate of the tax due, even when the final assessment has not yet been received.

What do you do with provisional assessments paid?

Suppose that in a simple example the calculated current tax for a year is €8,000 and €6,000 has already been paid through provisional assessments. A payable position of €2,000 may then remain. The tax charge does not become €6,000 because that amount was debited from the bank. Also keep assessments of older years separate. A payment in the current year may relate to an earlier tax year. Without a breakdown, such a payment may wrongly change the current tax charge. Therefore use a schedule with year, assessment number, amount, payment and outstanding balance.

Art. 2:362 DCC is the starting point for the view of result and equity. Art. 2:375 DCC mentions liabilities in respect of taxes. Under commercial accounting policies, deferred tax positions due to temporary differences may also be relevant; that is a different question from the set-off of advances. A micro or small entity applying permitted tax-based policies must assess that regime consistently. Do not automatically put a deferred item in a report just because the template has a line for it. Discuss which policy applies in your file and which items are really needed as a result.

How do you compare with the final assessment?

Later compare the final return and assessment with the calculation in the annual accounts. Investigate differences and determine how they must be processed. A new assessment is not by definition proof that the earlier annual accounts were incorrect; there may be new information or a changed assessment. Keep the tax calculation and the reconciliation with provisional payments in the final file. If necessary, request a change of the provisional assessment in good time via the applicable route. That helps cash planning, but does not replace the annual calculation and accounting for the tax charge.

Sources

• Belastingdienst: provisional corporate income tax assessment
• KVK: what do the annual accounts consist of?

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