Income tax credit brought forward from previous years

Lesson Summary- Income tax credit brought forward from previous years for Cambodia Tax

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If Prepayment of Income Tax or withholding tax credit [1] exceeds the annual income (profit) tax liability or minimum tax from previous years, the excess amount can be used to offset against the current annual income (profit) tax liability or minimum tax ( for this year) and future income (profit) tax liability or minimum tax.

1.If Minimum Tax is higher than Profit ( Income ) Tax Liability

Minimum tax Liability = Minimum Tax -Income tax credit brought forward from previous years

2. If Minimum Tax is lower than Profit ( Income ) Tax Liability

Profit ( Income) Tax Payable = Profit ( Income ) Tax Liability – Income tax credit brought forward from previous years

Note:

1.If Minimum tax Liability < 0, so it is  Tax credit carried forward

2.If Profit ( Income) Tax Payable < 0, so it is Tax credit carried forward

Example 1

Below are tax information for ABC Company for 2018 :

– Profit (income) tax liability is $60,000

– Minimum tax is $2,100

-Prepayment of Income (profit) tax is $2,000

-Income tax credit brought forward before year 2018 is $1,000.

Required 

Calculate Profit ( Income) Tax Payable or Minimum tax Liability for ABC Company.

Answer 

Calculate Profit ( Income) Tax Payable or Minimum tax Liability for ABC Company

Because Profit (income) tax liability is higher than minimum tax is higher than  ( $60,000  > $2,100), so we will take higher amount $60,000.

Profit ( Income) Tax Payable = Profit ( Income ) Tax Liability – Income tax credit brought forward from previous years- Prepayment of income (profit) tax =60,000-2,000-1,000=$57,000

so Profit (income) tax Liability =$100

[1] Excess (unused) Prepayment of Income Tax or withholding tax credit refers to Income tax credit brought forward from previous year.