Application of other than accrual and matching generally accepted accounting principles for the purpose of legal entities taxation on corporate income tax

Continuing discussions of application of generally accepted accounting principles for the purpose of legal entities taxation on corporate income tax, there is analyzed relationship of legal regulation of corporate income tax and financial accounting in the way of revealing other than accrual and matching principles effect. As a consequence, the purpose of this article is to answer the question which principles of corporate income tax calculation are really applied according to Republic of Lithuania law on corporate income tax simultaneously disclosing these principles fiscal meaning. The object of this article is disclosure of other than accrual and matching principles application following Law on corporate income tax. Performed analysis of problematical questions discloses that paragraph 1 of Article 7 of Law on corporate income tax shall be itemized that income and costs shall be recognised on an accrual basis and in accordance with other accounting principles laid down in the legal acts that regulate accounting, not only except for the cases where, in accordance with the provisions of this Chapter, income may be recognised in accordance with the principle of cash accounting and in accordance with the provisions of this Article, but also except for the cases in other articles and purpose of Law on corporate income tax. The article reveals that for the purpose of legal entities taxation on corporate income de facto such principles of corporate income tax calculation are applied like entity’s concept, periodicity and monetary measure principles. Neutrality, prudence, going concern and partially consistency principles could be described as declaratory and “dormant” for the purpose of legal entities taxation on corporate income tax. This scientific research reveals that 1) the purpose of substance over form principle is the same in taxation on corporate income tax and financial accounting. 2) Application conditions of this principle are different. A) It is important objective circumstances and subjective element (purpose) that transactions seeks only to obtain benefit from taxation for application of substance over form principle following Law on corporate income tax. These application conditions are based on tax avoidance function. B) It is important only objective circumstances as transactions shall really occur for application of this principle in financial accounting. There is identified difference of 3) the moment of application of substance over form principle comparing the following on Law on corporate income tax or financial accounting rules