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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,
StefanoHi 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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