What should I remember regarding permanent and temporary differences - ProProfs Discuss
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What should I remember regarding permanent and temporary differences between tax provision and actual tax payable?

Asked by Christian, Last updated: Sep 29, 2021

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John Smith

John Smith

John Smith
John Smith

Answered Sep 08, 2016

These are the basics to remember: permanent differences are those that will not reverse and lead to taxes payable. The example given in the text is dividend income earned by the corporation. Based on the income tax act, canadian dividends paid to corporations are generally not taxable, even though the dividends are recorded as income. As such, there is no tax expense on the income statement and no tax to report on a return.

Future income taxes are those that may taxes that may be payable at some future date. For example, CCA generally allows for higher depreciation rates than general accounting principals. This can cause a difference between taxes actually paid and the higher tax indicated on the financial statements. The difference most often results in future taxes to be paid and shows up on the balance sheet as a liability.

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