Net taxable income
When it comes to corporate taxation, the notion of net taxable profit is central. It is this value that largely determines the amount of tax to be paid by companies. But how is it calculated and what are the specifics to understand? This article guides you through the essentials of net taxable profit.
What is Net Taxable Income?
Net taxable income is a company’s financial result after the application of certain authorized tax deductions and before taxation. This is the amount that serves as the basis for calculating corporate income tax or income tax in the BIC, BNC or BA category, depending on the case.
How is net taxable profit calculated?
The calculation of taxable net income begins with the determination of accounting income, itself based on the company’s income statement. Non-deductible expenses are then subtracted from this result, and income that is not deductible is added. This includes many items, such as depreciation and provisions, which are subject to specific tax rules.
Definition of the accounting framework
Before determining this net profit, it is essential to establish the precise accounting framework. These include taxable income and business expenses, both of which must meet specific criteria.
Tax adjustments
Tax adjustments consist of a series of restatements of accounting income. Items such as penalties on government contracts or fines are generally non-deductible. Conversely, certain tax incentives can be added to reduce this benefit.
Specific deductions
A number of special deductions can further reduce the amount of net taxable income. Echoing the State’s tax incentive policy, they are designed to encourage companies in certain activities, such as research and development or investment in regional aid areas.
Depreciation and provisions
Depreciation represents the loss in value of a company’s fixed assets. Their deduction is a mechanism for spreading the expense represented by the purchase of a fixed asset over several years. Provisions, on the other hand, are sums set aside to cover probable losses or expenses. These two items have specific deduction rules for tax purposes.
Exemptions and specific territories
Certain companies may benefit from exemptions due to their geographical location. For example, companies located in “zones franches urbaines” (urban tax-free zones ) are eligible for tax exemptions on their profits, subject to certain conditions.
Impact of net taxable income on taxation
Once determined, net taxable profit is used as the basis for calculating corporate income tax or income tax. It is therefore essential for companies to have a good grasp of the rules governing their calculation, so as to anticipate the amount of their tax obligations and optimize their tax burden, thanks to in-depth knowledge of the legislation in force and of any applicable tax rebates and tax credits.
Frequently asked questions
Here is a list of frequently asked questions about Net Taxable Income.
What’s the difference between accounting income and taxable net income?
Accounting profit is a figure determined in accordance with accounting principles, while net taxable profit corresponds to this profit adjusted for tax write-backs and deductions. The latter is therefore specifically calculated to serve as the basis for taxation.
How to optimize net taxable income?
To optimize net taxable income, the company can take advantage of various tax niches, special depreciation allowances and regulated provisions, as well as manage losses carried forward, while scrupulously complying with legislation.
Are there specific advantages for SMEs in terms of net taxable profit?
Yes, in certain cases, SMEs can benefit from preferential measures, such as reduced tax rates or specific deduction schemes. It is advisable to study the various options with a chartered accountant or tax lawyer.