TAX ACCOUNTING

JESSICA ANDREA ATENCIA CHAMORRO

UNIVERSITY CARTAGENA

FACULTY OF ECONOMIC SCIENCES

PUBLIC ACCOUNTING PROGRAM

CARTAGENA DE INDIAS

2017
Tax accounting

There are some types of tax in the boxes below, but some letters are missing. Can you
complete the words?

1- Income
2- Sales
3- Inheritance
4- Corporate
5- Property
6- Value added
7- Excise

Which taxes in the boxes above are you familiar with? Briefly explain each one.

I am familiar with sales taxes, excise, inheritance, income and property

- Sales tax: The sales tax, commonly referred to as VAT value added tax, is a tax that
is levied on the consumption of goods and service

- Excise tax: Excise taxes, also called excise duty, excise or excise duties in the name
of the European Union taxes, and are a set of indirect taxes levied selectively
consumption of certain goods.

- Inheritance tax: is, to be exact, a tax on the gratuitous transmission of goods,

among which are included: donations, bequests, benefits by trust, benefits
originated by collection of insurance when the contractor is not the beneficiary

- Income tax: The income tax and complementary is a single tax and includes income
tax, occasional gains. ... It records all the income realized in the year, which may
produce an increase (net) in the equity at the moment of its perception and that have
not been expressly excepted.

- Property tax: are used to help finance local government services. These include
public schools, fire and police protection, roads, parks, streets, sewer systems and
water treatment, waste collection, public libraries and many other local services.
What do foreign companies and individuals need to know about the taxation system in your
county?

In Colombia there are taxes at national and regional level. National taxes apply to all
natural or legal persons resident in the country and regional taxes are determined by each
department or municipality according to the parameters set by the Law.

1- A manager has asked his accountant to explain depreciation. Listen and answer the
question.
a- What are the five methods of depreciation the accountant mentions?
- Straight line
- Declining balance
- Sum - of - the years - digits
- Unit of production
- Hours of use

2- Now look at the accountants list of definitions. Can you match them to the methods
of depreciations she mentioned in exercise 1?
1- Sum - of - the years - digits
2- Straight line
3- Declining balance
4- Hours of use
5- Unit of production

3- Prepare a short presentation on depreciation methods. First read the questions below
and note down your answers. Then organize your notes and give your presentation.

- What depreciation method does your company / client use on its assets?

The company JMMG s.a uses the method of depreciation in straight line

- Why has your company / client chosen that method?

The company chose this method because straight-line depreciation is one of the
most widely used depreciation methods, mainly due to its simplicity and ease of
implementation.

Straight-line depreciation implies a constant depreciation, a periodic rate of

unchanged depreciation.
 In this method of depreciation it is assumed that the asset undergoes a constant wear
over time, which is not always true, since there are assets that, as they wear out, the
level of wear increases, are increasing.

The calculation of depreciation using the straight-line procedure is as follows:

Value of the asset: 120,000,000

Asset Life: 5 years

Annual depreciation: 120,000,000 / 5 = 24,000,000

Monthly depreciation: 120,000,000 / 60 = 2,000,000

If the company handles salvage fee, it is detracted from the value of the asset and
the difference is the depreciation. Straight-line depreciation is one of the most
widely used methods of depreciation, mainly because of its simplicity and ease of
implementation.

Straight-line depreciation implies a constant depreciation, a periodic rate of

unchanged depreciation.

In this method of depreciation it is assumed that the asset undergoes a constant wear
over time, which is not always true, since there are assets that, as they wear out, the
level of wear increases, are increasing.

The calculation of depreciation using the straight-line procedure is as follows:

Value of the asset: 120,000,000

Asset Life: 5 years

Annual depreciation: 120,000,000 / 5 = 24,000,000

Monthly depreciation: 120,000,000 / 60 = 2,000,000

If the company handles salvage fee, it is detracted from the value of the asset and
the difference is the depreciation.

- What are the alternatives in your country for depreciating assets?

In Colombia these methods of production are used: straight line, units of production
and declining balances

8- Match these expressions with tax to their definitions

1 tax avoidance g. trying not to pay tax (legal)
2 tax bracket f. tells you what amount of tax to pay based on income
3 tax evasion h. trying not to pay tax (illegal)
4 tax exempt d. when you don't have to pay tax on certain income
5 tax exile a. someone who lives in another country for tax reasons
6 to abolish tax e. to cancel a tax
7 to impose tax b. to introduce a new tax on something
8. to increase tax c. to make the tax go up

9- Use words from the box to fill in the gaps

abolish bracket breaks exempt exile increase property return

1- The government needs more money, so it is planning to increase taxes

2- He earns a lot of money. he must be in the highest tax bracket
3- She lives there because she has to shes a tax exile
4- They are planning to abolish the tax on large company cars, and replace it with a
tax on all company cars
5- She is a student, so she is tax exempt
6- The government is planning to introduce new tax breaks for IT companies
7- Dont buy a house this year the property taxes are being abolished next March
8- A tax return is the same as a tax declaration its a list of income and tax
deductible expenditure for the tax authority

Taxation planning

The governments of some countries use the taxation system to promote investment.
Taxation laws are enacted to encourage domestic and international corporations to either
invest or raise capital, and tax breaks are given to specific industries or to certain types of
expenses to attract investors and consumers. As a result of these taxation measures, there is
significant scope for taxation planning in some countries and companies would be well
advised to use such opportunities to structure their business in the most tax effective
manner.

For effective taxation planning, companies rely on tax specialists who must have an
excellent understanding of both their clients business and the various taxation laws.
Companies turn to their tax advisers for help on all the taxes for which they are liable, such
as income tax, sales tax, property tax and payroll tax. These tax specialists are normally
Chartered Accountants and CPAs who are not only involved in the preparation of tax
returns, but who also give advice on a multinational companys domestic and foreign
operations. Furthermore, they represent their clients before the tax authorities.
Planificacin tributaria

Los gobiernos de algunos pases utilizan el sistema tributario para promover la inversin.
Se promulgan leyes tributarias para alentar a las empresas nacionales e internacionales a
invertir o recaudar capital, y se conceden desgravaciones fiscales a industrias especficas oa
ciertos tipos de gastos para atraer a inversionistas y consumidores. Como resultado de estas
medidas tributarias, existe un margen significativo para la planificacin fiscal en algunos
pases y las empresas deberan aconsejarles utilizar esas oportunidades para estructurar sus
negocios de la manera ms efectiva en trminos fiscales.

Para la planificacin efectiva de impuestos, las empresas confan en los especialistas en

impuestos que deben tener una excelente comprensin de los negocios de sus clientes y las
diversas leyes fiscales. Las empresas recurren a sus asesores fiscales para obtener ayuda
sobre todos los impuestos por los que son responsables, como el impuesto sobre la renta, el
impuesto sobre las ventas, el impuesto sobre la propiedad y el impuesto sobre la nmina.
Estos especialistas en impuestos son normalmente contadores pblicos y CPAs que no slo
participan en la preparacin de declaraciones de impuestos, sino que tambin dan consejos
sobre las operaciones nacionales y extranjeras de una empresa multinacional. Adems,
representan a sus clientes ante las autoridades fiscales.

Over to you

Can you think of any tax breaks which the government in your country has introduced
recently?

R// In Colombia, the government introduced tax cuts in the current tax reform, as well as
the implementation of new taxes and some increases, which are for the benefit of all
citizens.

Where can a potential investor go for advice?

R// The investor can go to the central accountants' board or where a tax advisor

What tax advice would you give to an individual who comes to live and work in your
country?

R// The Colombian government can issue different types of visas to foreigners who want to
come to the country, however, for Venezuelans who wish to settle in Colombia, the most
common options are five: student, business, investor, job and spouse.
There is a positive aspect to take into account, and is that working for others in Colombia is
much easier. It's as easy as having your insurance and that's it.

You will also find the option of a service contract, which is similar to being a self-
employed person, since the company does not pay you any insurance or legal benefits, you
simply pay your salary, and you must have your health insurance, and pay your ARP
(System of Professional Risks)

Even though there is some ease, it is not so easy to find qualified work. It depends on many
factors, luck, contacts, and what specialized you are looking for, but as I said, working in
Colombia is possible.

Wages in Colombia, you've heard. The minimum wage is 737,717 Colombian pesos to be
exact. The change to euros and pesos fluctuates a lot, and if today, February 10, 2016 we
make the change, in euros you would be earning 170 . If on the contrary, you have
training, approximately the base salary is at 1,200,000 Colombian pesos, which are
approximately 320 .

Surely you are thinking that wages are very low, and yes, if they are, but everything
depends on your position.

The housing in Colombia and the rents, are in the clouds. Buying a house almost costs the
same as in New York, and rentals, you have to look far to find something decent.

Like everything in this city, depending on the area and stratum, it will be cheaper or more
expensive.

If you are going to live in Bogota and you are looking for the area T or the pink zone,
which are places of restaurants and trendy pubs, the rent will be much more expensive since
it is a higher stratum (stratum 5-6 ) than if you live farther away.

Usually zones of stratum 3 and 4 to live are good, they are neighborhoods affordable and
normally safe.