VBC Tutorial – Taxes

PROFIT TAX

Profit tax – is the basic tax levied on transactions (sales from warehouses, vacation of manufactured products by production units, retail sales in stores) and the provision of services.

According to the current algorithm, the tax is accrued ‘only’ ‘for profits directly to this game recount of goods sold or services rendered. Such an algorithm eliminated the possibility of double taxation in undelivered deliveries, which is common among beginners quite often.

Profit tax (PT) is calculated by the formula:

PT = (R – PC – C) × (PT_rate/100), where: 

R — actual revenue from the sale of products or services; PC — estimated ‘prime costs’ of the sold products or expendables spent on the provision of services, for enterprises in the service sector without consumables PC = 0; C — expenses of the enterprise not included in the SS, but lowering the tax base in this specific turn;
PT_rate — profit tax rate (%).

Cost items that are not included in the cost but reduce the tax base:

• For production units, only storage costs are not included in the SS of manufactured products, but they reduce the tax base;
• In warehouses, warehouse costs, rental of premises, and payments for innovations are taken into account;
• In stores and at-service enterprises, storage costs, rental of premises, innovation payments, salary costs, advertising costs, management expenses, and maintenance costs (for the service sector) are taken into account.

Expenses for the purchase of goods are not reflected in the cost price in absolute terms, ‘but following the used up (sold or used in production) inventory’. Thus, it is possible that a unit has a negative balance (for example, due to large volumes of purchases for future use), but still pays income tax.

The tax of production units ‘cannot be zero’, even if a player, for example, sells manufactured products below cost. The minimum tax amount, in any case, paid from a unit of goods produced, is determined by the basic profitability of production (see the description of the “ UTII below). At the same time, the tax on the warehouse, trade, and service units in the game may not be levied if the taxable base is less than or equal to zero.

COMMON TAX FOR IMPUTED EARNINGS

The common tax for imputed earnings (CTIE) of Virtonomics is the tax that determines the minimal sum of the tax on the production activity (which is not applied to commercial subdivisions).
CTIE is not an extra tax to the profit tax for the operating subdivisions collected in Virtonomics.
The scheme of collecting the CTIE is activated in case the products are sold for a price that is lower than their cost price, or if the products are sold with a rate of profit lower than the basic production profitability equal to the regional profit tax rate (the specific connection between the rate of profit and the profit tax rate in the region is conditional).
If the produced goods are sold for the price where the rate of profit is higher than the regional profit tax rate, the CTIE is not charged and a player pays the profit tax only.

CTIE for one item of produced and sold goods is calculated according to the following formula:
CTIE= CC × (PT_rate/100) × (IEproduct/100) where:     

CC — estimated production costs of produced goods;
PT_rate – profit tax rate (%);
IEproduct – imputed earnings (%) for a specific product.

The red part of the formula is taxable income determined by the product of “CC” (estimated production cost of produced goods) and basic production profitability which (in Virtonomics) is equal to the PT_rate (profit tax rate (percent) in the specific region where the production subdivision is situated).

The blue part of the formula is the tax rate of the CTIE.
The CTIE rate is a macroeconomic way to control the efficiency of different kinds of production.
In Virtonomics for the productions that are currently highly profitable and massive, we use the tax rate up to 1,0 (100%).
I.e. the CTIE is charged from full taxable profit without any kind of benefits.
For the productions that are not developed enough according to the level of supplies and other analytical data, we use differentiated benefits for each kind of product. The benefits can be quite significant: CTIE for some kinds of products are up to 20 times lower (when the imputed earnings for the product are equal to 5%)
To learn the current CTIE rates you need Analytics ► Macroeconomics ► Choose any country ► Region, and then from the list of the cities switch to the CTIE rates.