Tax question

businessdit

Hi does anyone know anything about tax?

If I have a company and say make €10,000 profit but have €10,000 expenses, do I pay corporation tax on the profit even though I had these reciepted expenses?

Or is the profit not seen as corporation tax deductible?

Thanks

scwazrh

Profit is what is left after all expenses , depreciation , losses etc are deducted from sales.Corporation tax is paid on profit

ants09

businessdit wrote: »

Hi does anyone know anything about tax?

If I have a company and say make €10,000 profit but have €10,000 expenses, do I pay corporation tax on the profit even though I had these reciepted expenses?

Or is the profit not seen as corporation tax deductible?

Thanks

Profit is what's left over after expenses.

Ie.
Income - expenses = profit

In simple terms.

Tax in on tax adjusted profit.

Sleeper12

businessdit wrote:

If I have a company and say make €10,000 profit but have €10,000 expenses, do I pay corporation tax on the profit even though I had these reciepted expenses?

You seem to be confusing takings with profit. If you take in 10,000 and you have 10,000 experiences then you have no profit at all. You would pay nil tax in this case

jimmii

If your revenue is 10k and your expenses are 10k there is no profit. That's assuming what you originally refer to as profit is actually income and not profit. If it is actually profit then how much expense you incur to achieve that profit is irrelevant you pay tax on the profit.

jimmii

Wow we all jumped on that one quickly!

businessdit

Ok great thanks all.
Was with my accountant and he confused me!

jimmii

businessdit wrote: »

Ok great thanks all.
Was with my accountant and he confused me!

Thats a little worrying! As long as he knows whats going on its ok!

Avatar MIA

businessdit wrote: »

Ok great thanks all.
Was with my accountant and he confused me!

What has been said above is correct in general, but taxable profit is not the same as financial profit.

Ask the accountant questions until you understand fully or come here and ask 😁

antoinolachtnai

It is important to understand that spending 10,000 euros is not the same as having 10,000 euros in expenses. For example, if you buy 1000 euros of stock, sell it for 10,000 euros, then buy 10,000 euros more stock, your profit is still 9,000 euros, and you will pay tax on that.

Gloomtastic!

antoinolachtnai wrote: »

It is important to understand that spending 10,000 euros is not the same as having 10,000 euros in expenses. For example, if you buy 1000 euros of stock, sell it for 10,000 euros, then buy 10,000 euros more stock, your profit is still 9,000 euros, and you will pay tax on that.

But surely if you buy €1,000 worth of stock in January, sell it throughout the year for €10,000 then buy €10,000 of stock in late December, then your profit, for that tax year is zero as you've lost €1,000!

StupidLikeAFox

Gloomtastic! wrote: »

But surely if you buy €1,000 worth of stock in January, sell it throughout the year for €10,000 then buy €10,000 of stock in late December, then your profit, for that tax year is zero as you've lost €1,000!

Nope, stock is an asset, not an expense. When you spend money on a phone bill it is an expense. When you spend money on stock you are converting one type of asset (cash) into another type of asset (stock)

In your example above, you have invested €1k capital, made €9k in profit, and invested €10k in more stock - but you have still made €9k in profit from a tax perspective

antoinolachtnai

Making a profit, by the way, is a good thing. (If you have a business where you can buy 1k of stock and can sell it for 10k, then call me.)

The biggest mistake people make when they think about business is that they think profits are money that you get to take out of the business. In fact, profit is primarily for paying down debt and reinvesting in the business.

The next big mistake is to think that if you make a profit, that means that you will have plenty cash. That is not necessarily the case. Conversely, just because you have a lot of cash at the end of your trading day, it doesn't mean you have made a big profit.

Bandara

Nice little thread this, great example of how we can help each other in this forum on the smallest (but actually most important) of things

pedrodalkey

Bandara wrote: »

Nice little thread this, great example of how we can help each other in this forum on the smallest (but actually most important) of things

Indeed, but reflects rather badly on the DIT business course undertaken by OP!

Bandara

pedrodalkey wrote: »

Indeed, but reflects rather badly on the DIT business course undertaken by OP!

Ah, The penny has dropped for me now

A fantasist

FifthProvince

I'd like to add a follow-up question if I may? Say if this scenario is for a self employed person what are the implications:

Example:
Has a business with €3000 of debts to suppliers
Gets a loan of €3000 to pay the debts
Makes a profit at years end excluding that loan of.... €2000 say
The loan is being paid off in €500 installments over the 6 months in the following year
Can this ongoing debt be put against the 'profits' made at the end of that year in order to pay nil tax or does the €2000 sitting in the current account on Dec 31st become taxable by October?

PS: I know these amounts are very small in terms of paying tax but just keeping it easy for illustration purposes. I'm just looking to find out how it works for self employed with a 'profit' at the end of year but with larger than profit debts to pay.

Many thanks to anyone who can shine some light on this for me!

ants09

FifthProvince wrote: »

I'd like to add a follow-up question if I may? Say if this scenario is for a self employed person what are the implications:

Example:
Has a business with €3000 of debts to suppliers
Gets a loan of €3000 to pay the debts
Makes a profit at years end excluding that loan of.... €2000 say
The loan is being paid off in €500 installments over the 6 months in the following year
Can this ongoing debt be put against the 'profits' made at the end of that year in order to pay nil tax or does the €2000 sitting in the current account on Dec 31st become taxable by October?

PS: I know these amounts are very small in terms of paying tax but just keeping it easy for illustration purposes. I'm just looking to find out how it works for self employed with a 'profit' at the end of year but with larger than profit debts to pay.

Many thanks to anyone who can shine some light on this for me!

The loan itself no, can't be offset against your taxable profits.

The interest portion of the loan can be, but not all at once but over the term off the loan.

Avatar MIA

Not tax related, but using a medium term loan, say 3 years or longer, would be bad practice to fund Working capital such as paying off creditors.

antoinolachtnai

You need to think about what profit is. Profit is when you sell a widget for more than what it costs you, all expenses taken into account. (This is a bit simplistic but it will do as a definition for now.)

Borrowing money doesn't really change profitability. If you borrow a billion euros it doesn't make your business profitable. Conversely if you pay back a billion euros, it doesn't mean it is loss making.

This is a difficult concept at first but take your time and try to get your head around it, it will be worth it, I promise.