Tax Adviser Certification key terms

The amount left after allowed deductions and exemptions are subtracted from total income for a year. It is the base on which income tax rates are applied.

The sum of all earnings from every head of income before deductions and exemptions are applied. It is the starting figure from which taxable income is computed.

The statutory categories into which income is classified, such as salary, business profits, capital gains, and other sources. Each head has its own computation rules and deduction limits.

The test that determines whether a person is taxed as a resident or non-resident for a tax year. It depends on days present and prior-year presence, and it affects the scope of taxable income.

An amount allowed by law to be subtracted from gross income or receipts in computing taxable income. It must fall within a specific statutory provision to be claimable.

A statutory exclusion that removes certain income or persons from the charge to tax entirely. Unlike a deduction, it is not netted against income but ignored.

The profit realised when a capital asset is transferred for more than its cost, adjusted for permitted improvements. It is taxed separately from ordinary income, often at distinct rates and holding-period rules.

The acquisition cost of an asset plus incidental purchase costs, used to measure gain or loss on disposal. It may be adjusted for improvements and certain indexation reliefs.

The length of time an asset is owned before disposal. It determines whether a gain is short-term or long-term and which tax rate and reliefs apply.

The annual write-off of an asset's cost over its useful life in accounts. Tax law often replaces it with separate capital allowance rules, so book and tax figures can differ.

A tax deduction for the cost of qualifying fixed assets, given in place of accounting depreciation. Rates and pooling rules are set by statute and vary by asset class.

The mechanism allowing a loss in one source or year to reduce taxable income elsewhere, subject to statutory limits. Rules differ for business, capital, and speculative losses.

An unused loss that is preserved and applied against profits of later years. Time limits and continuity-of-ownership conditions usually apply.

A band of taxable income to which a particular marginal rate applies. Progressive systems stack slabs so higher income portions face higher rates.

A mechanism that softens the jump in tax when income crosses into a higher rate band or loses a benefit. It phases in the extra charge gradually rather than at a cliff edge.

An additional charge levied on the tax amount, not on income, typically above a threshold. It is calculated as a percentage of the basic tax liability.

Tax paid in instalments during the year based on estimated income, rather than in a single final payment. Shortfalls can attract interest penalties.

Tax collected at the point of payment by the payer and remitted to the authority on the recipient's behalf. It acts as a prepayment of the recipient's final liability.

A domestic withholding mechanism requiring specified payers to deduct tax on designated payments such as salaries, rent, or professional fees. Credit for the deduction is given to the payee.

A bilateral treaty allocating taxing rights between two countries to prevent the same income being taxed twice. It sets tie-breaker rules, reduced withholding rates, and relief methods.

A relief allowing tax paid abroad on foreign-source income to be credited against domestic tax on the same income. It is usually capped at the domestic tax attributable to that income.

The rules setting prices for transactions between related entities in different tax jurisdictions. They require dealings to be priced as if between independent parties, at arm's length.

The standard requiring related-party transactions to be priced as comparable independent parties would agree. It is the benchmark against which transfer pricing is tested and adjusted.

A fixed place of business or dependent agent through which a foreign enterprise carries on business in a country. Its existence gives that country taxing rights over attributable profits.

Arranging affairs to reduce tax within the letter of the law but contrary to its purpose. Statutes and general anti-avoidance rules may disregard or recharacterise such arrangements.

A broad statutory provision empowering the revenue to counteract arrangements whose main purpose is to obtain a tax advantage. It can recharacterise transactions or deny the benefit.

The illegal non-payment or underpayment of tax through concealment, false statements, or failure to report. It exposes the taxpayer to penalties and criminal prosecution.

The formal process by which the revenue determines the tax payable, either accepting a filed return or issuing its own computation. It creates the enforceable demand for tax.

A system where the taxpayer computes and declares its own liability, with the revenue verifying later through risk checks. Penalties apply for incorrect or late returns.

A examination of a taxpayer's records and returns to verify the correctness of reported income and tax. It may result in additional assessment, penalties, or no change.

A multi-stage tax on the value added at each stage of supply of goods or services. Businesses collect it from customers and claim credit for tax paid on their inputs.

The credit a registered business claims for tax paid on purchases used in its taxable supplies. It prevents cascading and is usually set against output tax for the period.

The tax a registered business charges on its own taxable supplies. It is the liability against which input tax credit is set to arrive at the net amount payable.

A supply of goods or services that falls within the charge to indirect tax at a positive rate. It contrasts with exempt and zero-rated supplies, which are treated differently for credit purposes.

A supply that is outside the charge to tax, so no tax is charged and no input credit is normally allowed. Businesses making only exempt supplies generally cannot register or recover input tax.

A taxable supply charged at a rate of zero percent, such as certain exports. Unlike exemption, it keeps the supply within the tax system so input credit remains recoverable.

The rule determining which jurisdiction may tax a cross-border supply. It decides whether a transaction is domestic or foreign and thus whether local tax applies.

A mechanism shifting the duty to account for tax from the supplier to the recipient. It commonly applies to imported services and certain domestic transactions.

The turnover level above which a business must register for indirect tax. Below it, registration is usually optional, and crossing it triggers compliance obligations.

The recurring interval, often monthly or quarterly, for which a registered business reports supplies, claims credit, and pays net tax. Late filing attracts interest and penalties.

A tax levied on goods entering or leaving a customs territory, based on value, quantity, or a combination. Rates depend on the tariff classification and origin of the goods.

The process of assigning goods to a code in the customs nomenclature, which fixes the applicable duty rate and rules. Misclassification can lead to underpayment and penalties.

The bringing of goods or services into a tax jurisdiction from abroad. Imports typically attract customs duty and often indirect tax at the border.

The sending of goods or services out of a tax jurisdiction. Exports are commonly zero-rated or exempt to keep domestic tax out of international trade.