Corporation Tax - suddenly its sky high

[stgahoy]

Im into my 2nd season as Juve, and Im loosing about 10M each month, last season I did lose a bit like 1M a month which was totally acceptable, but suddenly now I have to pay an incredibily high corporation tax - i paid 1M£ corporation tax for the whole last season and now (May so still 2 months to go in the season) Ive already paid £60M !  Any idea whats it about ?

 

[Guest]

I imagine you saw a large increase in revenue & profits last season, the more you earn the more you pay in tax.

[fmFutbolManager]

You shouldn't be taxed monthly, that seems like a bug to me. I had an annual corporation tax of €11m last season at Parma with income of €350m (€250m turnover).

[Spurs + Eastbourne 4eva]

21 hours ago, fmFutbolManager said:

You shouldn't be taxed monthly, that seems like a bug to me. I had an annual corporation tax of €11m last season at Parma with income of €350m (€250m turnover).

Depends on the country and depends on the profit levels as to how often you have to make corporation tax payment. Over a certain level (which profit making football clubs will be) you will be making instalment payments for corporation tax throughout the year.

Also, corporation tax has nothing to do with income/turnover, it is based on you taxable profit throughout the year.

[Zuluwarf]

so if he is being taxed the Italian corporate tax rate of 24% (came into effect 1 Jan 2017) then on a tax bill of 59million for corporate tax he would have to have posted a pre-tax profit of 249 million.

The Italian vat rate is at 22% meaning his 17 million vat bill would have been based on an income of 77 million.

His total expenses for the period were around 202million (wages+bonuses+loyalty payments) which far exceeds the 77 million revenue for the period and should have posted a loss and not incurred any corporate tax. Only thing I can think of is they have combined income tax of 43% with corporate tax which would be estimated at 86 million if you tax bonuses wages and loyalty bonuses. But that can't be so as the previous year with 1million corporate tax bill clearly didn't tax salaries and wages.

the only possible explanation is if Juv had assessed losses for previous years and they reduced the previous and current tax bills by a significant amount. but I really don't think SI's financial modeling is that comprehensive or complex.

So the financial model, in this case, is very broken and is a massive bug. Either it's not calculating vat and Corporate tax correctly and or missing income tax completely. would be very interested to know if how the FM financial model deals with losses.

 

 

[sporadicsmiles]

We cannot really know what is going on unless the OP also posts the income and we can have a look at the net profit (which I think is what tax is calculated on). 

[MrPompey]

I expect that for FM reasons the actual % variables per country per relevant year are not modelled that accurately on real life. Ultimately its a football management simulation rather than financial management simulation. Especially since there would need to be a whole load of people updating / adding static data to keep this sort of thing accurate.

Instead i suspect that there is a generalised FM financial model that is used to simulate finances in a simple but roughly accurate way and will include variances regarding the type of club...private, public, fan owned etc

In the case of the OP i suspect we need to know a bit more about what has happened to the club to determine why the corporation tax has suddenly jumped. I believe this is to be based on the profit a club has made. In this case perhaps it is down to a player sale, large fe player sale based on payment installments, increased income perhaps due to increased gates or for a specific match say a final or even winning the league where money for whatever reason is paid to the club that has generated a significant income to the club.

I think we should initially focus the OP to what activity / income change has occurred that coincides with increase on corp tax rather than specifically worry about how its calculated and for what % for what year in which country

[Zuluwarf]

you can get a damn good ideal, based on what his VAT bill was as all income is subject to VAT meaning he had an income of 77 million (figures don't lie).

[Zuluwarf]

2 minutes ago, MrPompey said:

I expect that for FM reasons the actual % variables per country per relevant year are not modelled that accurately on real life. Ultimately its a football management simulation rather than financial management simulation. Especially since there would need to be a whole load of people updating / adding static data to keep this sort of thing accurate.

Instead i suspect that there is a generalised FM financial model that is used to simulate finances in a simple but roughly accurate way and will include variances regarding the type of club...private, public, fan owned etc

In the case of the OP i suspect we need to know a bit more about what has happened to the club to determine why the corporation tax has suddenly jumped. I believe this is to be based on the profit a club has made. In this case perhaps it is down to a player sale, increased income perhaps due to increased gates or for a specific match say a final or even winning the league that has generated a siginificant income to the club.

I think we should initially focus the OP to what activity / income change has occurred that coincides with increase on corp tax rather than specifically worry about how its calculated and for what % for what year in which country

His income can be calculated using his vat bill using uk at 20% (85million) or italian 22% (77 million) doesn't make a difference his expenses 202 million way outstripped his income 85 or 77 million, meaning he shouldn't have paid any corporate tax so something is definitely wrong with the financial modeling

[MrPompey]

I agree its related to income. We simply need the OP to check / remind himself what reason has caused his income to increase dramatically

(I could be tempted to ask how is profit calculated on a player sale e.g. profit on sale price less purchase price and costs associated with player development blah blah but i wont  . Additionally and I doubt its modelled in FM but players  I dont think pay tax on commission fees paid to agents and foorball clubs can claim back VAT but lets ignore all this)

[Zuluwarf]

agreed on the VAT rebates, commissions would be all taxable (income), there are a few other areas which I am finding gaps in the modeling, like who pays income tax the player or the club (where I live in SA its the clubs responsibility to pay the players income tax and deduct it from his wages), what happens with losses over a period of time. I just feel this breaks the immersion of managing a football club, why make every other area of the club management so detailed and not get one of the most important aspects right?

[MrPompey]

@Zuluwarf -  You miss the point. 1. It is unlikely to model based on specific VAT rates applicable for specific countries 2. The OP post screenshot does not detail income.

In relation to VAT i'm not sure thats accurate. You pay VAT for a service or for a product. VAT has no direct correlation to income. If a company or individual received an income

In addition if you/we want to be pedantic  for some goods or services VAT is added, VAT is exempt or is already included in the sale price

Lets move back to finding out if the income for the club changed, thats the key element here I would think

[Snorks]

You do need to know the income to draw any conclusions from the VAT (or GST or Sales Tax or whatever it;'s called in that region)

VAT is collected when you sell something, tickets for example.

VAT is paid when you buy something.

The difference between the two is the VAT bill you pay the Revenue - you can't calculate from the VAT bill alone what the turnover is, without knowing what the expenses were.

So, sell 100 tickets at $20 each incl 20% VAT. That's $1600 to the club, $400 dollars VAT collected. You pay for the away team dressing rooms to be repainted in pink, you pay the painter $2000 incl VAT in the same period as the ticket sales. So for that VAT period, you have collected $400, you have paid out $400 in VAT. Therefore, your VAT bill would be $0.00, with a turnover of $2000.