Page 14 - PowerPoint Presentation

GOVERNMENT GRANTS AND GOVERNMENT ASSISTANCE

Deferred tax

Asset-based grant where the grant is off-set against the cost of the asset

• Deferred tax implications will arise with regards to the cost of the asset,
because there are differences in the carrying amount of the asset and
the tax base of the asset. In the latter, the grant is not allowed to be
offset against the cost of the asset, but is immediately taxed on receipt
thereof.

• Deferred tax implications may arise with regard to the cost of the asset

because there may be differences in:

• the starting dates from which depreciation and tax allowances are
calculated (the date the asset is ready for use is used for depreciation
purposes and the date the asset is brought into use is used for taxation
purposes), and

• the depreciation rates and methods may differ from the tax allowance
rates and methods. For example, depreciation may be calculated at 20%
per annum on the straight-line method apportioned for a period shorter
than a year. The tax allowances such as Sections 12C and 13(1)(b) do not
need to be apportioned for periods shorter than a year and are calculated
at different rates.

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