BUSINESS TAXATION NOTES
1
,Readings:
Schön, Wolfgang. "The odd couple: A common future for financial and tax accounting." Tax L.
Rev. 58
(2004a): 111.
IAS/IFRS standards – IAS 37, Provisions, Contingent Liabilities and Contingent Assets
Nina Aguiar et al. Computation of Taxable Business Profits, EATLP International Tax Series,
editor:
Andrés Báez Moreno, ISBN9789087228828, 2024,
https://www.ibfd.org/product/12490/download/pdf
Schön, Wolfgang. "International Accounting Standards-A Starting Point for a Common
European Tax
Base?." European Taxation 44, no. 10 (2004b): 426-440.
Pinto Nogueira, João Félix, Pasquale Pistone, Ivan Lazarov, Alessandro Turina, and Sergio
Messina.
"Proposal for a Council Directive on BEFIT: an Initial Assessment." SSRN 4600456 (2023).
Paul Newton and Helen Bristoll. Principles of Accounting. free-management-ebooks.com
IBFD Tax Research Platform, accessible via the TiU libra
Exam:
- Online exam, home
- 10 December
- 100% - 5.5 pass – 3 hours
- The exam will have simple questions but a lot of them -> be fast
Lecture 1: Introduction
Two-part course:
1. Business part (Anita Poulou)
2. Legal part (Dr. Martha Caziero)
▪ Part 1
1. Introduction to financial accounting
2. Introduction to tax accounting
3. Relationship between financial accounting & tax filing
4. Liabilities & provisions
2
,Basics of business administration
1 – Setting the scene: The sandwich truck
Food truck on campus, 1 worker.
Product: simple sandwiches (bread, cheese, lettuc
2 – Cost of ingredients per sandwich
Per sandwich: Bread = €0.10, Lettuce = €0.20, Cheese = €0.50
Cost of production for one sandwich? €0.
3 – Choosing a selling price
What should we take into consideration? Why?
All expenses: Production costs (€0.80) + worker’s salary & utilities (€10,000/year)
Competition: Price of one lunch at self service
4 – Annual sales revenue estimate
University = 20,000 students, all go to Mensa for 100 meals a year.
Mensa lunch price: €4
Goal: Demand estimate / Market sizing
▪ Sandwich price = €3 → 1,000 clients, 200 meals a year → €600,000 in revenue
▪ Sandwich price = €5 → 200 clients, 100 meals a year → €100,000 in revenue
600,000 = 1,000 x 200 x 3; 100,000 = 200 x 100 x 5
5 – Revenue, costs/expenses, profit
Definitions + Calculations
Which selling price should we choose
Selling price: €5
Costs & Expenses: 10,000 + 0.80 x 200 x 100 = 26,000
Revenue: 100,000
Profit = Revenue – Costs & Expenses = 74,000
Selling price: €3
Costs & Expenses: 10,000 + 0.80 x 1,000 x 200 = 170,000
Revenue: 600,000
Profit = Revenue – Costs & Expenses = 430,000
3
, 6 – Understanding economic value
Business = Profit seeking (unlike NGOs, charities)
Profit = Economic contribution (e.g., GDP is a sum of profits)
Why should we sell sandwiches for €3 instead of €5?
▪ Ethical reasons: Raising living standards by providing more meals
▪ Practical reasons: Who is going to buy this truck? Hire the worker?
In principle, more value creation is good for all, including
consumers, investors, and... the State!
7 – Corporate tax basics
Companies usually pay taxes calculated based on their profit
Taxable base × Tax rate = CIT (corporate income tax)
Most times: Taxable base ≈ Profit
8 – Why CIT ≈ Rate x Profit
Why Taxable Base ≈ Profit:
1. Fairness: Two businesses may have the same revenue but very different costs.
2. Ability to pay: Profit shows what is really left over — what the business can actually afford to
contribute.
3. Risk-sharing: The government shares in profits and losses.
4. Encourages investment and hiring: Expenses (wages, inputs, expansion) reduce profit, so firms
are not penalized for growing.
Why a Flat Rate:
1. Simple and predictable: Businesses know exactly what share of profit will go to tax.
2. Scales with size: Small profits = small taxes; big profits = big taxes.
3. Scales with public good usage: A company’s success generally reflects its proportional
reliance on tax-funded infrastructure.
4. Encourages efficiency: Firms always keep part of every euro earned, so they keep motivation
to expand and innovate.
9 – Calculating CIT (simplified)
Profit = €430,000
CIT if tax rate is 20%? 25%? 30%
4
1
,Readings:
Schön, Wolfgang. "The odd couple: A common future for financial and tax accounting." Tax L.
Rev. 58
(2004a): 111.
IAS/IFRS standards – IAS 37, Provisions, Contingent Liabilities and Contingent Assets
Nina Aguiar et al. Computation of Taxable Business Profits, EATLP International Tax Series,
editor:
Andrés Báez Moreno, ISBN9789087228828, 2024,
https://www.ibfd.org/product/12490/download/pdf
Schön, Wolfgang. "International Accounting Standards-A Starting Point for a Common
European Tax
Base?." European Taxation 44, no. 10 (2004b): 426-440.
Pinto Nogueira, João Félix, Pasquale Pistone, Ivan Lazarov, Alessandro Turina, and Sergio
Messina.
"Proposal for a Council Directive on BEFIT: an Initial Assessment." SSRN 4600456 (2023).
Paul Newton and Helen Bristoll. Principles of Accounting. free-management-ebooks.com
IBFD Tax Research Platform, accessible via the TiU libra
Exam:
- Online exam, home
- 10 December
- 100% - 5.5 pass – 3 hours
- The exam will have simple questions but a lot of them -> be fast
Lecture 1: Introduction
Two-part course:
1. Business part (Anita Poulou)
2. Legal part (Dr. Martha Caziero)
▪ Part 1
1. Introduction to financial accounting
2. Introduction to tax accounting
3. Relationship between financial accounting & tax filing
4. Liabilities & provisions
2
,Basics of business administration
1 – Setting the scene: The sandwich truck
Food truck on campus, 1 worker.
Product: simple sandwiches (bread, cheese, lettuc
2 – Cost of ingredients per sandwich
Per sandwich: Bread = €0.10, Lettuce = €0.20, Cheese = €0.50
Cost of production for one sandwich? €0.
3 – Choosing a selling price
What should we take into consideration? Why?
All expenses: Production costs (€0.80) + worker’s salary & utilities (€10,000/year)
Competition: Price of one lunch at self service
4 – Annual sales revenue estimate
University = 20,000 students, all go to Mensa for 100 meals a year.
Mensa lunch price: €4
Goal: Demand estimate / Market sizing
▪ Sandwich price = €3 → 1,000 clients, 200 meals a year → €600,000 in revenue
▪ Sandwich price = €5 → 200 clients, 100 meals a year → €100,000 in revenue
600,000 = 1,000 x 200 x 3; 100,000 = 200 x 100 x 5
5 – Revenue, costs/expenses, profit
Definitions + Calculations
Which selling price should we choose
Selling price: €5
Costs & Expenses: 10,000 + 0.80 x 200 x 100 = 26,000
Revenue: 100,000
Profit = Revenue – Costs & Expenses = 74,000
Selling price: €3
Costs & Expenses: 10,000 + 0.80 x 1,000 x 200 = 170,000
Revenue: 600,000
Profit = Revenue – Costs & Expenses = 430,000
3
, 6 – Understanding economic value
Business = Profit seeking (unlike NGOs, charities)
Profit = Economic contribution (e.g., GDP is a sum of profits)
Why should we sell sandwiches for €3 instead of €5?
▪ Ethical reasons: Raising living standards by providing more meals
▪ Practical reasons: Who is going to buy this truck? Hire the worker?
In principle, more value creation is good for all, including
consumers, investors, and... the State!
7 – Corporate tax basics
Companies usually pay taxes calculated based on their profit
Taxable base × Tax rate = CIT (corporate income tax)
Most times: Taxable base ≈ Profit
8 – Why CIT ≈ Rate x Profit
Why Taxable Base ≈ Profit:
1. Fairness: Two businesses may have the same revenue but very different costs.
2. Ability to pay: Profit shows what is really left over — what the business can actually afford to
contribute.
3. Risk-sharing: The government shares in profits and losses.
4. Encourages investment and hiring: Expenses (wages, inputs, expansion) reduce profit, so firms
are not penalized for growing.
Why a Flat Rate:
1. Simple and predictable: Businesses know exactly what share of profit will go to tax.
2. Scales with size: Small profits = small taxes; big profits = big taxes.
3. Scales with public good usage: A company’s success generally reflects its proportional
reliance on tax-funded infrastructure.
4. Encourages efficiency: Firms always keep part of every euro earned, so they keep motivation
to expand and innovate.
9 – Calculating CIT (simplified)
Profit = €430,000
CIT if tax rate is 20%? 25%? 30%
4
