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FVTPL Vs. FVTOCI tax implications

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBR Exams › FVTPL Vs. FVTOCI tax implications

  • This topic has 1 reply, 2 voices, and was last updated 7 years ago by P2-D2.
Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • January 27, 2018 at 9:38 pm #433481
    Stefano
    Member
    • Topics: 23
    • Replies: 28
    • ☆☆

    Dear Christopher,

    Would it be correct to say that classifying a financial asset at FVTOCI is more tax efficient than classifying it at FVTPL? Indeed, the revaluation initially made through OCI would not be taxed, would they? I know this is a bit out of topic, but I could not help but asking this question.

    Thank you very much,
    Stefano

    January 29, 2018 at 10:33 pm #433906
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 7193
    • ☆☆☆☆☆

    Hi Stefano,

    The tax efficiency will depend on the tax rules in the tax jurisdiction. I’m no tax expert, but I think that any gains/losses in profit or loss are not taxed until the investment is disposed and there is then a capital gain/loss, hence the financial reporting treatment is irrelevant. If it is FVTPL or FVTOCI then the tax treatment is the same, a capital gain/loss arises on disposal, and so one is no more tax efficient than the other I believe.

    Good to see you thinking it through though and linking it to other subjects. Good work!

    Thanks

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