The company, North S.L.

, has the following information in the Balance Sheet and

Profit and Loss Account for 2016, before calculating its Corporate Tax:

BALANCE SHEET
ASSETS LIABILITIES
69.360,00 A) NON CURRENT ASSET A) NET EQUITY 105.130,00

4.860,00 1. Intangible asset A-1) Equity 60.000,00

4.860,00 1. R+D 1. Capital 60.000,00
4.860,00 201 DEVELOPMENT 1. Issued capital 60.000,00
64.500,00 II. Tangible Fixed Assets 100 SOCIAL CAPITAL 19.500,00

64.500,00 2. Technical facilities and others. III. Funds 12.000,00

52.000,00 213 MACHINERY 1. Legal y statuary 12.000,00
8.000,00 216 FURNITURE 112 LEGAL FUNDS 7.500,00
3.500,00 217 INFORMATION PROCESSING EQUIP. 2. Other funds 7.500,00
25.000,00 218 TRANSPORT 113 VOLUNTEER FUND 25.630,00
-24.000,00 281 CUMULATIVE DEPRECIATION VII. Result of the fiscal year 32.000,00

104.050,00 B) CURRENT ASSET B) NON-CURRENT LIABILITY 32.000,00

20.500,00 II. Stock II. Long-term debts 32.000,00

20.500,00 1. Commercial 5. Other financial liabilities 32.000,00

20.500,00 300 GOODS 171 LONG-TERM DEBTS 36.280,00

16.250,00 III. Debtors C) CURRENT LIABILITY 6.100,00
11.850,00 1. Clients (sales and services) III. Short-term debts 6.100,00
11.850,00 b) Clients (sales and services) short- 5. Other financial liabilities 6.100,00
term
14.300,00 430 CLIENTS 523 SUPPLIERS 30.180,00
1.800,00 431 CLIENTS, COMMERCIAL PURPOSE V. Creditors 11.200,00
-4.250,00 490 VALUE IMPAIRMENT 1. Suppliers 11.200,00
4.400,00 6. Other credits with Public Adminis. b) Short-term suppliers 11.200,00
4.400,00 473 PUBLIC FINANCES, WITHHOLDINGS 400 SUPPLIERS 18.980,00
67.300,00 VII. Cash 3. Different Creditors 18.980,00

67.300,00 1. Treasury 410 Creditors 105.130,00

2.200,00 570 CASH FLOW, EUROS
65.100,00 572 BANKS AND CREDIT INSTITUTIONS
173.410,00 TOTAL ASSETS TOTAL NET EQUITY AND LIABILITIES 173.410,00
LOSS AND PROFIT ACCOUNT
1. Net revenue 204.300,00
700 SALES OF GOODS 200.000,00
705 PROVISION OF SERVICES 5.500,00
708 SALES RETURNS -1.200,00
4. Supplies -69.800,00
600 PURCHASE OF GOODS -72.450,00
610 CHANGES IN INVENTORY 2.650,00
6. Staff costs -75.170,00
640 WAGES AND SALARIES -56.800,00
642 SOCIAL SECURITY -16.470,00
649 OTHER SOCIAL EXPENSES -1.900,00
7. Other operating costs -19.850,00
626 BANK SERVICES -700,00
627 ADVERTISING AND PR -3.600,00
628 SUPPLIES -3.800,00
629 OTHER SERVICES -7.100,00
631 OTHER TAXES -400,00
694 IMPAIRMENT LOSSES -4.250,00
8. Depreciation - 13.950,00
681 DEPRECIATION - 13.950,00
12. Other outcomes - 600,00
678 EXTRA COSTS - 600,00
A) ACTIVITY OUTCOME 24.930,00
13. Financial income 700,00
b) Other financial income 700,00
769 OTHER FINANCIAL INCOME 700,00
B) FINANCIAL OUTCOME 700,00
C) INCOME BEFORE TAXES 25.630,00
D) FISCAL YEAR OUTCOME 25.630,00

Table of Contents

Page 1
 Solution 1.................................................................................................................. 7

Solution 2.................................................................................................................. 9

Solution 3................................................................................................................ 10

References..............................................................................................................12

1. Make in each of the following points the adjustment needed to

obtain the tax base of the Corporate Tax, basing the response and
establishing the amount that corresponds. You must also indicate if

Page 1
 you are facing a temporary or permanent difference. In points 8 and 9
you should not propose any adjustment, in these two cases you
should describe how they affect the liquidation of the Corporate Tax.

Solution 1

a. The machinery was acquired for € 52,000 in January 2014. An accounting

depreciation expense of € 7,000 is provided. Fiscally a maximum
amortisation coefficient of 12% and a maximum period of 18 years is
established.

Price of Machinery €52,00 Amortisation Coefficient (0.12)

0
Depreciation expense
(2014) €7,000 €6,240

Year 2 Depreciation (2015) €7,000 €6,240

Year 3 Depreciation (2016) €7,000 €6,240

Difference €31,00 €33,280

0

The maximum amortization has been exceeded by the depreciation

expense, as shown in the table, and the depreciation value based on the
coefficient will be used as a future deductible. This will be regarded as a
long-term adjustment.

b. The transport element or vehicle was acquired on January 1, 2013, with a

price of € 25,000 and a useful life of 5 years. The accounting amortisation
is carried out using the method of decreasing digit numbers.

The following is considered s permanent adjustment.

Price of

Page 1
 €25,000.00
Vehicle

Year Usefulness Sum of year SYD % Annual Depreciation

remaining digit (SYD)
1 5/15 0.333333 33% €8,333.33
2 4/15 0.266667 27% €6,666.67
3 3/15 0.2 20% €5,000.00
4 2/15 0.133333 13% €3,333.33
5 1/15 0.066667 7% €1,666.67
TOTAL
YEARS 15

Solution 3

c. Provision of € 1,250 is provided for a debt that occurs on October 1, 2016.

The liability has not been claimed judicially.

The € 1250 provision has not been claimed in court, so its inclusion in the
balance sheet should have no impact on overall taxation, making the
adjustment temporary.

d. A provision for insolvencies of € 3,000 is provided, an obligation that has

already been judicially claimed.

The € 3000 provision for insolvency should be included because it has

been legally claimed and is thus considered a permanent adjustment.

e. The administrators have been paid for the performance of senior

management functions with € 10,000.

Before tax is calculated, a payment of € 10,000 for management

functions should be included. As a result, it is regarded as a permanent
change.

f. An administrative penalty of € 600 has been imposed on the company.

Also included is a € 6000 administrative penalty, which is considered a

permanent adjustment.

Page 1
g. The company has paid the posters for a sports conference for its
employees. This serves to advertise their products and services and has
cost € 1,200. The company gave the customers who attended the event a
batch of products worth € 2,200. Extraordinarily, he has given his
employees an assortment of products worth € 400.

In the profit and loss adjustment section, include advertisements and products
given to employees. The total deduction was € 3800, making it a permanent
adjustment.

h. The company is entitled to a deduction for having made investments

affected to R & D of € 1,200.

The money spent on R&D is tax-free.

i. The company has made instalment payments of € 4,400.

Because of the € 4400 instalment payment, the company is eligible for tax relief.

Page 1
Solution 2

2. Calculate the liquidation of the Corporate Tax in a word document,

using the following scheme.:

Page 1
Solution 3

North S.L. is thinking of making an international expansion. However, you need

to determine whether to start big in a new market or expand into a potentially
large market, but at a slower and safer pace. The options that the company's
management has are:

Considering international expansion, a company must see all of the

factors related to the chosen market, If it is a new or existing market.

In cases where expansion is being considered, factors such as political risk, tax
laws, and workplace culture must all be considered before taking the plunge.
New markets may lack the necessary structural qualities to accept these new
and upcoming products, as well as the necessary laws and political reviews,
which could create additional roadblocks and bottlenecks.

a. Enter the North American market, where it is known that their services
can work, but they do not know in depth. They can enter through
Canada and expand across the United States or vice versa.

Canada is a mature market with numerous opportunities because it already

has structures in place to welcome new players into the corporate
environment. Their taxes are currently capped at a maximum of 15%, which
is slightly lower than in other markets. Furthermore, depending on the
nature of the business, there are times when non-residential businesses are
exempt from paying these taxes. The agreement between Spain and
Canada also aids businesses in avoiding double taxation, in which the same
income and financial transaction is taxed twice.

b. Open slowly but firmly in the Portuguese-speaking market. Due to its

proximity, they know the Portuguese market perfectly, and this would
allow North S.L. access to the Brazilian market, a country with a
thriving economy.

Expansion into a neighbouring market, such as Brazil, has a number

of benefits as well. To begin with, the language and work culture are

Page 1
 similar and well-known by the company, which includes how products
are distributed as well as how the market will react to said product,
given that the market is already developed. This knowledge and
history can be used by businesses to forecast their future growth
patterns.

Brazil, on the other hand, is known for having a high corporate tax
rate, which includes a 15% basic rate and a 10% surtax on income
exceeding (Brazilian Real) BRL 240,000 (approximately 42,000 USD).

A 9% social contribution on pre-tax profits rounds out the corporate

tax, bringing the total to a staggering 34 percent. With this analysis, it
is clear that, in comparison to Canada's taxation, Brazil's taxation
would have a significant negative impact on business income.

To find out which option is more beneficial for North S.L., compare the
possibilities that arise and justify which of the two is better, considering
which country offers better fiscal conditions and that North S.L. seek the
most significant benefit.

There are advantages and disadvantages to both of these markets.

However, taking into account the taxation and market expansion
opportunities that Canada provides within the United States, which is widely
regarded as one of the largest and most profitable markets to enter.
However, the North American market would be the preferred market.

Page 1
 References

Retrieved from Eneb Noted

Kenton, W., & Johnson, J. B. (2020, December 21). What is sum-of-The-Years' digits?
Retrieved from https://www.investopedia.com/terms/s/sum-of-the-earsdigits.asp

Resolver. (2020, April 17). Assessing the risks associated with international expansion.
Retrieved from https://www.resolver.com/blog/assessing-risks-
associatedinternational-expansion/

Canada Revenue Agency. (2020, April 24). Corporation tax rates. Retrieved from
https://www.canada.ca/en/revenueagency/services/tax/businesses/topics/corpor
ations/corporation-tax-rates.html

Canada. (n.d.). Retrieved from

https://taxsummaries.pwc.com/canada/corporate/taxeson-corporate-income

Canada. (n.d.). Retrieved from

https://taxsummaries.pwc.com/canada/corporate/income-determination

Page 1