Course Overview

Income Tax for Trading Companies

Introduction

Income tax is one of the most important types of direct taxes imposed on companies and individuals. It is calculated on the net income or profits earned during a specific accounting period. For trading companies, income tax represents a financial obligation that reflects the company’s contribution to funding the state’s budget.

What is Income Tax?

Income tax is a financial levy imposed by the state on the net profits generated by the company after deducting all legally allowed costs and expenses.

How to Calculate Income Tax for Companies

1. Determine total revenues: sales and other income.

2. Deduct direct and indirect costs: such as cost of goods sold and operating expenses.

3. Calculate net accounting profit.

4. Apply tax adjustments: exclude non-deductible expenses and include taxable income.

5. Determine taxable profit.

6. Apply the applicable tax rate (varies by jurisdiction).

Importance for Companies

• Legal compliance to ensure continued operation.

• Contribution to economic development by funding public services.

• Enhances transparency in corporate financial reporting.

• Improves corporate reputation with investors and financial institutions.

Companies’ Obligations

• Maintain proper accounting records.

• Submit annual income tax returns on time.

• Retain supporting documents for revenues and expenses.

• Pay the due tax to avoid fines and penalties.

Conclusion

Income tax is a cornerstone of the corporate tax system. It is not only a financial obligation but also a mechanism to foster trust in the business environment and achieve tax fairness.

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