Dictionary
Debitoor's accounting dictionary
Tax base

Tax base - What is a tax base?

A tax base is the total value of business assets or income that is liable to be taxed by the government.

Want to know more about how assets affect your business finances? Read more on our blog: ‘Assets, depreciation and amortisation’.

A tax base is used to determine your company’s tax liabilities. Your tax liabilities determine how much tax you owe to the relevant tax authority, in most cases, the government. To calculate your tax liabilities, you need your tax base as well as your tax rate.

Factors that influence your tax base

A tax base is calculated based on the total amount of all of your businesses assets. Assets are anything of value owned by a company. This may include:

  • Capital gains
  • Property including offices and warehouses
  • Revenues
  • Company vehicles
  • Machinery

There is an endless list of what may be considered as an asset to your business, but anything that can be expressed in cash value is an asset. In some cases, only the money earned from selling assets will count towards your tax base.

How does your tax base influence the amount of tax you owe?

Tax bases can differ between countries and jurisdictions, so it is important to look into the tax regulations of where your business is based. In the UK, your tax base can help you determine how much your business owes for corporation tax (limited company), capital gains tax (sole trader/partnership), and business rates.

Depending on your business structure, the type of taxes may differ. You may also be entitled to tax relief if your business qualifies.

Your tax base helps calculate your tax liabilities, or the tax you owe. Tax liability is calculated using your tax base and tax rate:

Tax liability = tax base x tax rate

Your tax rate is the percentage of which your business is taxed. For instance, in the UK, corporation tax is 19%.