Ias Income Tax Deferred Tax

Income Tax and Deferred Tax (Section 29 / IAS 12)

Overview

Both Section 29 and IAS 12 use the temporary-differences approach: deferred tax arises on differences between the carrying amount of an asset or liability and its tax base. The system computes current tax and deferred tax per book per period, recognises them through P&L (or OCI / equity as required), and discloses the tax-rate reconciliation.

Required first reads

• doctrine/accounting-finance-doctrine.md
• doctrine/references/ifrs-for-smes-default.md (Section 29)
• doctrine/references/full-ifrs-overlay.md (IAS 12)
• doctrine/references/live-rate-verification-protocol.md (tax rates)
• doctrine/references/chart-of-accounts.md

Current tax

Current tax is the amount payable (or recoverable) for the period based on taxable profit (loss) using tax rates enacted or substantively enacted by the reporting date. The system computes:

• Accounting profit (per the entity book).
• Adjustments for non-taxable income, non-deductible expense, timing items.
• Taxable profit.
• Current tax expense = taxable profit × current tax rate (read from source register).
• Income tax payable: posted to 2150 Income Tax Payable.

Deferred tax — temporary differences

Identify temporary differences between carrying amount and tax base, by asset / liability.

Deferred tax measured at the rate expected to apply when the difference reverses; current statutory rate where reversal pattern is uncertain.

Recognition of deferred tax assets

DTA recognised only to the extent it is probable that taxable profit will be available against which the deductible temporary difference / tax loss can be utilised.

Under Section 29: same probable threshold; assessment less onerous than IAS 12 in some aspects but the principle is the same.

Valuation allowance

Where probable threshold is not met for some portion, the unrecognised DTA is disclosed as a tax loss / temporary difference with no carrying amount.

Presentation

• Current tax assets and liabilities offset where legal right exists and intention to settle net.
• Deferred tax assets and liabilities offset where same authority and same taxable entity (or group with intention to settle net).
• Deferred tax balances are non-current; never current.
• Tax expense broken into current and deferred components in the SOCI.
• Tax effect of items recognised in OCI / equity goes through OCI / equity, not P&L.

Tax-rate reconciliation (disclosure)

Profit before tax × statutory rate                 = (a)
+ effect of non-deductible expenses                = (b)
- effect of non-taxable income                     = (c)
+/- effect of changes in tax rates                 = (d)
+/- effect of unrecognised / re-recognised DTA     = (e)
+/- effect of WHT credits utilised                 = (f)
+/- effect of group / consolidation items          = (g)
+/- other                                          = (h)
= Tax expense per books                            = (i)

The reconciliation is a year-end disclosure note item; the build supports the data behind it from the journals.

CoA implications

Live-rate verification

Income tax rate (corporate, presumptive, small-taxpayer) — verified per doctrine/references/live-rate-verification-protocol.md. The system reads the rate from the source register at provision time; the source-register entry carries the verified rate, effective period, source URL, and date accessed.

Build implications

• A tax-base engine per asset / liability class.
• Temporary-difference computation by class at each reporting date.
• Recognition rule per DTA: probability assessment captured.
• Tax-rate version control via source register.
• Journal generator for current tax and deferred tax provisions.
• Tax-rate reconciliation report.
• Audit-trail of every assumption, with reviewer sign-off.

Forbidden patterns

• Deferred tax computed on intangible (e.g. on goodwill initial recognition in scenarios where IFRS forbids).
• DTA recognised without probability assessment (blocker).
• Tax rate hardcoded in code or templates (blocker).
• Current tax presented as non-current (blocker).
• Tax-rate reconciliation missing in disclosures for full IFRS entities (major).

Acceptance evidence

• Tax-base reconciliation by class.
• Temporary-difference register.
• Recognition decisions logged per DTA component.
• Source-register entry for the current tax rate verified-current.
• Tax provision journals via posting service.
• Tax-rate reconciliation disclosure.

Files

• SKILL.md.
• references/temporary-difference-catalog.md.
• references/recognition-checklist.md.
• examples/sme-tax-provision-2026-04.md.

Last reviewed: 2026-05-12. Next review due: 2026-11-12.

Prerequisites

• Load doctrine/accounting-finance-doctrine.md before applying this skill.
• Load governance/finance-accounting-quality-gate.md when the output is a release, client artefact, SRS, SDS, proposal, business plan, or implementation plan.
• Use doctrine/source-register/ for final statutory, tax, payroll, FX, EFRIS, eTIMS, or authority-template values.

Inputs

Outputs

Decision Rules

• Prefer IFRS for SMEs for typical SME entities unless full IFRS, local law, donor requirements, or client policy requires otherwise.
• Treat every money-touching workflow as ledger, control, reconciliation, evidence, and reporting scope.
• Do not finalize statutory values without source-register support and reviewer status.
• Use business-language output for operators and accountant-language output for ledger, reporting, and audit users.
• Escalate uncertain framework, tax, or statutory interpretations to the required reviewer role instead of presenting them as final.

Acceptance Evidence

• Inputs and outputs above are present or explicitly marked not applicable.
• Relevant quality-gate blockers have been checked and no blocker remains unresolved.
• Examples or fixtures cover at least one happy path and one failure or caveat path for this skill's domain.
• Reviewer role, review date, and open caveats are recorded for release-grade artefacts.

Anti-Patterns

• Treating draft planning assumptions as final statutory or accounting facts.
• Hiding tax, payroll, FX, or authority-template caveats in prose instead of source-register state.
• Producing technically correct accounting output without a plain-language layer for non-accountant users.
• Closing a remediation or implementation item without observable evidence.

Required References

• doctrine/accounting-finance-doctrine.md.
• governance/finance-accounting-quality-gate.md.
• docs/reference-manifest.md for declared reference states.
• Domain-specific references listed earlier in this skill.

Examples

• Include at least one normal workflow example for this skill's domain.
• Include at least one exception, rejection, reversal, stale-source, or reviewer-caveat example where the domain can fail.

Review Metadata

Last reviewed: 2026-05-15. Next review due: 2026-11-15.