Accumulated Earnings Tax


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Accumulated Earnings Tax

A special tax imposed on corporations that accumulate (rather than distribute via dividends) their earnings beyond the reasonable needs of the business. The accumulated earnings tax is imposed on accumulated taxable income in addition to the corporate Income Tax.

References in periodicals archive ?
Improperly accumulated earnings tax (IAET) even goes up from 10 to 15 percent.
"Consequently, the assessment in the Formal Letter of Demand and Assessment Notices for deficiency income tax (IT) and improperly accumulated earnings tax (IAET) for the year 2009 is cancelled and withdrawn.
* Accumulated earnings tax of 20% of accumulated taxable income.
Lim added that the TMAP also supports the proposal to revisit tax exemptions given to certain entities to allow for a more targeted system, as well as a proposal for the DOF to revisit the 10-percent improperly accumulated earnings tax (IAET).
Since the swap was declared tax-free, this meant the cancellation of P10.55 million in value-added tax and P61.6 million in improperly accumulated earnings tax.
Paying the profits to himself as a tax-deductible salary or bonus may bring Nick an IRS penalty for unreasonable compensation, yet retaining the dividends in the company might lead to the accumulated earnings tax.
Questions cover 21 topics, including shareholder-related issues, determination of corporate income tax liability, tax accounting and procedure, judicial doctrines, earnings and profits, constructive dividends, stock distributions, redemptions, bootstrap sales, accumulated earnings tax, complete liquidations, partnerships, comparison of entities, and Sections 351, 304, and 305.
(9) In deciding whether a family owned bank was subject to the accumulated earnings tax, the IRS took into account the regulatory scheme the bank was operating under to determine its reasonable needs.
Accumulated earnings tax and purchase of business life insurance.
The accumulated earnings tax is a penalty tax against a corporation that holds profits beyond its normal business needs, thus keeping the profits from taxation upon distribution.
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