The monetary and fiscal concern had a devastating impression on financial institution earnings, with loss-making banks reporting international advertisement losses of round USD four hundred billion in 2008. This entire record units the industry context for financial institution losses and gives an summary of the tax remedy of such losses in 17 OECD international locations; 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 supply upward push to these dangers; and describes the instruments profit our bodies need to deal with those strength compliance dangers. It concludes with options for profit our bodies and for banks on how hazards related to financial institution losses can top be controlled and diminished. desk of content material :ForewordExecutive SummaryChapter 1. environment the context for present degrees of financial institution tax lossesChapter 2. capability scale/fiscal price of banks tax lossesChapter three. precis of nation ideas on the subject of taxation of financial institution lossesChapter four. major matters for banks when it comes to tax lossesChapter five. Compliance/tax hazard matters for profit our bodies relating to financial institution tax lossesChapter 6. instruments to be had to profit our bodies to handle compliance hazards with regards to financial institution tax lossesChapter 7. Conclusions and recommendationsAnnex A. kingdom ideas when it comes to taxation of financial institution lossesGlossary of acronyms and technical phrases
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Extra resources for Addressing Tax Risks Involving Bank Losses
Particular attention will be devoted by revenue bodies to the consistency of the transfer pricing policy of banks with the business models adopted over time. In the years before the financial crisis, some banks were managing large financial assets through foreign subsidiaries located in low-tax jurisdictions. Due to the crisis, large losses have materialised in relation to these financial assets, over and above the losses which have been sustained in relatively high-tax jurisdictions. Revenue bodies are concerned that in some cases these loss-making financial assets may be allocated to relatively high-tax jurisdictions, through non arm’s length transactions or dealings.
Com). 3tr write-down figure, and grossing up the implied losses of USD 489 billion by that fraction, thus USD 489 billion x USD 1300 billion/USD 876 billion = USD 726 billion, and this is rounded down to USD 700 billion. 6. com/markets, consulted on 26 or 29 March 2010. 7. EPS figures imply 2010 profits for these banks of USD 61 billion compared with publicly reported pre-tax profits for the same banks, and those they have subsequently acquired, of USD 273 billion. 8. Average weighted by current market capitalisation.
4. In the case of a realised tax loss carried forward, the tax value of the loss carried forward simply offsets tax due on taxable profits in future years. In the case of an unrealised tax loss carried forward, there will have been an accounting loss in Year 1 not matched by a tax loss. The value of the unrealised tax loss carried forward can be subsequently realised in (say) Year 2 in one of two ways. Either the write-down giving rise to the unrealised tax loss carried forward from Year 1 might be reversed, which will give rise to an accounting profit in Year 2 which will not be taxable.