deferred tax liability

Definition

A tax liability that a company owes and does not pay at that current point, although it will be responsible for paying it at some point in the future. This is often caused by a difference in a company's balance sheet, due to the differences between accounting practices and tax regulations. Occasionally, a company will have a difference in their taxable income and income before tax due to these differences, resulting in a deferred tax liability.

Use this term in a sentence

If a company is unable to pay taxes they can create a deferred tax liability so they can pay this liability in the future when funds are available.

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deferred credit interperiod income tax allocation