Determination of Taxable Sum

Persons liable to the taxes on trade and industry have to file a return with the fiscal administration before April 1st of each year, giving their turnover, profits and any other particulars which may help to assess these taxes. The date is advanced to February 1st for enterprises that have been established in the course of the previous year.

Patente tax being based on turnover, it is not necessary to deal in detail with the methods which are used to ascertain this turnover; the Administration fixes it, of course, by reference to the returns, the accounts of the enterprise, if any, and other evidence derived from various sources which, in the absence of accounts, enable the turnover to be determined by a process of assumption.

Nor does any difficulty arise in connection with insurance enterprises and banks; the patente tax due from them is determined by reference to their operations, and this applies also to the tax on the capital of companies.

The position is different in the case of profits tax. The law prescribes that the net profits liable to this tax shall be determined in two ways: empirically, by applying a certain coefficient to turnover, or on the basis of the enterprise’s accounts.

Normally, enterprises not belonging to companies are assessed to profits tax on the presumptive method and, if the taxpayer wishes to be taxed on the basis of his accounts, he must make a statement to that effect when submitting his return, while his accounts must be closed before May 1st of the tax year. He must also submit his books to the tax inspector, if requested.

For purposes of assessing taxable profits empirically, commercial and industrial enterprises are divided, respectively, into 223 and 194 kinds. For each kind, there are minimum and maximum profit coefficients, determined with due regard to the special conditions of each kind. The net taxable profit is obtained by applying to the enterprise’s turnover the coefficient for that kind of business.

If the application of these coefficients gives results that do not appear to reflect the real position of the enterprise, the assessment authorities may reduce the coefficient if the actual profits are lower than the profits reckoned empirically, or may increase it if the actual profits exceed the empirical figure.

Taxation on the basis of accounts is applied to private enterprises which expressly request this method and which satisfy the legal requirements mentioned above, and also to companies. The latter must provide the Administration with a copy of their balance-sheet during the month in which it is approved by the general meeting of shareholders.

In this case, the net profits are the difference between gross profits and expenditure deductible as having been incurred in earning and maintaining those profits.

Gross profits mean all cash receipts and all advantages in kind which an enterprise realises from its operations (whether these are directly or indirectly connected with its purpose or whether they are regular or occasional) or from property in its possession. The following is a fairly complete list of the expenses and items that may be deducted from gross profits in order to obtain the taxable net profit. Unless the contrary appears from the very nature of the expenses in question, the different components of this list are common to all enterprises, whether they belong to individuals or to companies: