Deferred tax definition

Deferred tax is an accounting practice used when a company owes a tax liability. Instead of paying this at that current time, the company becomes responsible for settling it at a point in the future.

This is usually caused by an inconsistency in a company’s balance sheet that occurs because of a variation between accounting practices and tax regulations. Occasionally, this will result in a company’s taxable income and income before tax figures differing. This creates a deferred tax liability.

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