Addressing Tax Risks Involving Bank Losses by OECD

By OECD

The monetary and monetary difficulty had a devastating effect on financial institution earnings, with loss-making banks reporting international advertisement losses of round USD four hundred billion in 2008.  This entire document units the marketplace context for financial institution losses and offers an outline of the tax therapy of such losses in 17 OECD nations; describes the tax hazards that come up relating to financial institution losses from the point of view of either banks and profit our bodies; outlines the incentives that provide upward thrust to these hazards; and describes the instruments profit our bodies need to deal with those strength compliance hazards. It concludes with innovations for profit our bodies and for banks on how dangers related to financial institution losses can top be controlled and lowered. desk of content material :ForewordExecutive SummaryChapter 1. environment the context for present degrees of financial institution tax lossesChapter 2. capability scale/fiscal rate of banks tax lossesChapter three. precis of state ideas on the subject of taxation of financial institution lossesChapter four. major concerns for banks on the subject of tax lossesChapter five. Compliance/tax probability matters for profit our bodies with regards to financial institution tax lossesChapter 6. instruments on hand to profit our bodies to deal with compliance hazards on the subject of financial institution tax lossesChapter 7. Conclusions and recommendationsAnnex A. kingdom principles when it comes to taxation of financial institution lossesGlossary of acronyms and technical phrases

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This value is likely to take into account a wide range of factors, including the following: • The carrying value under applicable accounting rules of any deferred tax asset on the group balance sheet, and the availability of such an asset to be reflected in the bank’s capital base. The value of capital is such that only if deferred tax assets are no longer able to count towards regulatory capital will other options be considered. • Profit forecasts and estimates as to how long it would take for losses to be fully set against taxable profits in the absence of planning.

To the extent that tax losses are recognised for regulatory capital purposes, banks may have less of an incentive to engage in loss-trafficking outside the banking group to get value from their accumulated losses carried forward. However, not all tax losses will qualify in full as regulatory capital, and in that case regulatory capital, profitability and cash-flow considerations may all act as incentives for banks to seek to convert accumulated losses into cash. Alternatively, banks may engage in planning to allocate losses within the banking group to the jurisdictions where their value is higher or to maximise the value of losses in anticipation of the change in capital adequacy rules discussed above.

Com/markets). 9. As above. 10. com. ADDRESSING TAX RISKS INVOLVING BANK LOSSES © OECD 2010 30 – 2. html. ADDRESSING TAX RISKS INVOLVING BANK LOSSES © OECD 2010 3. SUMMARY OF COUNTRY RULES IN RELATION TO TAXATION OF BANK LOSSES – 31 Chapter 3. Summary of country rules in relation to taxation of bank losses Abstract This chapter summarises relevant country tax rules relating to bank losses. These include rules for how losses are recognised for tax purposes as well as rules for how tax relief may be given in respect of such losses.

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