Internal financing in tax law

As part of the Internal financing The company does not receive the financial resources via the financial markets, but rather they are generated through the sales process. An important form of internal financing is self-financing. Profits achieved through the sales process are not distributed to the equity capital provider, but are retained in the company through the formation of reserves.
The influence of taxation on self-financing depends on the tax treatment of open and hidden reserves (silent self-financing, hidden reserves) and the possibility of creating provisions. Hidden reserves are not subject to taxation when they are created; income taxes are incurred when they are released.

The extent of open self-financing depends on the amount of income tax, in the case of corporations on trade tax and corporation tax. The silent self-financing (tax accounting policy) is largely determined by the devaluation process of an asset. If the loss in value of an asset is less than the depreciation, there are hidden reserves that will be released again in later years.

Overall, only the acquisition or production costs may be charged for each asset. Long-term provisions, e.g. B. Pension provisions represent a high financing potential of internally tied debt.

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