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The monetary and fiscal trouble had a devastating impression on financial institution gains, with loss-making banks reporting worldwide advertisement losses of round USD four hundred billion in 2008.  This entire file units the industry context for financial institution losses and offers an summary of the tax therapy of such losses in 17 OECD international locations; describes the tax hazards that come up on the subject of financial institution losses from the point of view of either banks and profit our bodies; outlines the incentives that supply upward push to these hazards; and describes the instruments profit our bodies need to deal with those strength compliance hazards. It concludes with techniques for profit our bodies and for banks on how hazards regarding financial institution losses can most sensible be controlled and decreased. desk of content material :ForewordExecutive SummaryChapter 1. environment the context for present degrees of financial institution tax lossesChapter 2. capability scale/fiscal fee of banks tax lossesChapter three. precis of kingdom ideas when it comes to taxation of financial institution lossesChapter four. major matters for banks when it comes to tax lossesChapter five. Compliance/tax danger concerns for profit our bodies on the subject of financial institution tax lossesChapter 6. instruments on hand to profit our bodies to handle compliance dangers on the subject of financial institution tax lossesChapter 7. Conclusions and recommendationsAnnex A. nation principles when it comes to taxation of financial institution lossesGlossary of acronyms and technical phrases

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In year 2, company Y receives 500 from company X in the form of a group contribution. The group contribution is treated as taxable income at the level of company Y (and is used against its tax losses) and as deductible at the level of company X. In year 3, ADDRESSING TAX RISKS INVOLVING BANK LOSSES © OECD 2010 5. COMPLIANCE/TAX RISK ISSUES FOR REVENUE BODIES IN RELATION TO BANK TAX LOSSES – 53 company Y pays 500 as tax-exempt dividends to company X. Thereafter, company Y is liquidated. The result of the transactions, assuming a tax rate of 28%, is that company X obtains a net benefit equal to 100, equal to the tax value of the contribution made (28 % of 500=140) minus the price paid for the shares (40).

With certain limitations, most participating countries allow the deduction for tax purposes of write-downs on loans. For a writedown to be allowed as a deduction for tax purposes, some countries require that the loss in value of the loan must be certain. In others, appropriately calculated impairment losses recognised in the accounts are allowed for tax purposes, but not general bad debt provisions. In many countries, restrictions may apply to the writedown of intra-group loans. As regards write-offs, in the majority of the participating countries, this is allowed only when the loan is considered “bad” and the creditor has exhausted all legal means for its recovery.

Obtaining tax relief for commercial losses Banks expect to receive tax relief for commercial losses ... Where a government taxes commercial profits, it will normally give tax relief for commercial losses. e. all governments set a limit on the amount of loss they are prepared to relieve by immediate offset or repayment, such as by reference to the profits taxed in the same and related entities in the same, previous or later years, or by reference to the location of the loss). Governments also apply additional restrictions to loss offsets on grounds of affordability, administrability, and to discourage taxdriven distortions.

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