Temporary Differences

For the purposes of applying the provisions of Article 30 of these Regulations, the Total Deferred Tax Adjustment Amount of a Constituent Entity for a Fiscal Year is equal to the deferred tax expense accrued in the Financial Accounting Net Income or Loss of the Constituent Entity for that Fiscal Year, subject to the adjustments specified in Paragraphs B to K of this Article.
Where the tax rate applied for the purposes of computing the deferred tax expense in the financial accounts of the Constituent Entity for a Fiscal Year is greater than the Minimum Rate, the deferred tax expense shall be recomputed at the Minimum Rate.
The Deferred Tax Adjustment Amount of a Constituent Entity for a Fiscal Year shall not include any of the following:
1. The amount of deferred tax expense related to items excluded from the computation of the Constituent Entity Income or Loss.
2. The amount of deferred tax expense with respect to a Disallowed Accrual and an Unclaimed Accrual which have not been paid during the Fiscal Year.
3. The impact of a valuation adjustment or Accounting Recognition adjustment with respect to a deferred tax asset.
4. The amount of deferred tax expense resulting from a remeasurement with respect to a change in the applicable tax rate in the Kingdom.
5. The amount of deferred tax expense with respect to the generation and use of tax credits.
Where a Constituent Entity has not recognised a loss deferred tax asset in its financial accounts because the recognition criteria are not met, the Total Deferred Tax Adjustment Amount shall be reduced by the amount that would have been reduced had the loss deferred tax asset for the Fiscal Year been recognised.
The Total Deferred Tax Adjustment Amount of a Constituent Entity for a Fiscal Year shall be increased by all of the following:
1. Any amount of a Disallowed Accrual paid during the Fiscal Year.
2. Any amount of an Unclaimed Accrual paid during the Fiscal Year.
3. Any amount of a Recaptured Deferred Tax Liability determined in a preceding Fiscal Year in accordance with Paragraphs H and I of this Article which has been paid during the Fiscal Year.
For the purposes of applying the provisions of Clause 2 of Paragraph C and Clause 1 of Paragraph E of this Article, a Disallowed Accrual means any movement in deferred tax expense accrued in the financial accounts of a Constituent Entity which relates to an uncertain tax position or to distributions from a Constituent Entity.
For the purposes of applying the provisions of Clause 2 of Paragraph C and Clause 2 of Paragraph E of this Article, an Unclaimed Accrual means any increase in a deferred tax liability recorded in the financial accounts of a Constituent Entity for a Fiscal Year that is not expected to be paid within five subsequent Fiscal Years from the end of the Fiscal Year in which it arose and for which the Filing Constituent Entity makes an Annual Election in accordance with Article 20 of the Law not to include in the Total Deferred Tax adjustment Amount for that Fiscal Year.
A deferred tax liability that is not a Recapture Exception Accrual and that has not been paid within five years of the end of the Fiscal Year in which it arose shall be treated as a Recaptured Deferred Tax Liability under Paragraph I of this Article to the extent that it was taken into account in determining the Total Deferred Tax Adjustment Amount of the Constituent Entity.
The amount of the Recaptured Deferred Tax Liability determined for the current Fiscal Year shall be treated as a reduction to the Covered Taxes for the Fiscal Year which falls five Fiscal Years before the current Fiscal Year and the Effective Tax Rate and Top-up Tax of that Fiscal Year shall be recomputed in accordance with Article 50 of these Regulations.
For the purposes of Paragraph H of this Article, a Recapture Exception Accrual means an amount of tax expense accrued in the financial accounts of a Constituent Entity that is attributable to changes in associated deferred tax liabilities in respect of any of the following:
1. Cost recovery allowances on tangible assets.
2. The cost of a license or similar arrangement from a government for the use of immovable property or exploitation of natural resources which entails significant investment in tangible assets.
3. Research and development expenses.
4. De-commissioning and remediation expenses.
5. Fair value accounting on unrealised net gains.
6. Foreign currency exchange net gains.
7. Insurance reserves and insurance policy deferred acquisition costs.
8. Gains from the sale of tangible property located in the same jurisdiction as the Constituent Entity that are reinvested in tangible property in the same jurisdiction.
9. Additional amounts accrued as a result of accounting principle changes with respect to any item referred to in Clauses 1 to 8 of this Paragraph.
Where a deferred tax asset attributable to a Constituent Entity Loss has been recorded for a Fiscal Year at a rate lower than the Minimum Rate, the deferred tax asset shall be recomputed at the Minimum Rate and the Total Deferred Tax Adjustment Amount shall be reduced accordingly provided that the Constituent Entity can demonstrate that the deferred tax asset is attributable to a Constituent Entity Loss.

Chapter 4 - Accounting

Article 33 - Temporary Differences