Corporate - Income determination

Last reviewed - 08 January 2020

Inventory valuation

Inventory can be valued at weighted-average cost, first in first out (FIFO), or current value at the close of the period, where this value is lower than the purchase price or production cost. Work-in-progress should be valued at production costs.

Capital gain

Capital gains form part of taxable profit.

Dividend income

Dividend means any distribution of money or property that a legal person distributes to a shareholder with respect to the shareholder’s equity interest in such legal person, with the exception of stock dividends and distributions in complete liquidation of the company. Whether or not a distribution is a dividend shall be determined under the preceding condition without regard to whether or not the legal person has current or accumulated income or profit or earnings.

Inter-company dividends

Inter-company dividends between residents are exempt from CIT (see the Withholding taxes section for more information).

Gross dividend income received by a resident company from a non-resident enterprise is subject to CIT. A foreign tax credit for taxes paid on these dividends is allowed for deduction from the CIT. The maximum amount of the foreign tax credit is the CIT liability with respect to that dividend income.

Passive income

Designated passive income (such as interest, royalties, and rent) forms part of taxable profit.

Foreign income

Resident entities are taxed on their worldwide income, and tax credits are available for foreign taxes incurred. Foreign income is taxable in the period it is earned; there is no provision allowing tax to be deferred on the income earned overseas.