Presentation of Taxes or Other Charges that Are Not Tax Expense or Tax Income Applying IAS 12 Income Taxes (IFRS 18)

The IFRS Interpretations Committee (IFRS IC) considered a question about how an entity, applying IFRS 18 Presentation and Disclosure in Financial Statements, classifies tax charges that are not income taxes in the scope of IAS 12 Income Taxes. The IFRS IC concluded that an entity is not permitted to classify those tax charges in the income taxes category. Consequently, an entity would generally classify them in the operating category.

This project responds to the concerns raised by respondents to the IFRS IC Tentative Agenda Decision of November 2025 about the outcome of applying IFRS 18. Respondents said that classifying some tax charges outside the income taxes category could reduce comparability and provide less useful information, particularly in situations in which an entity pays a specified tax charge instead of an income tax (like Saudi Arabian zakat).

At its July 2026 meeting the IASB agreed to propose amendments to IFRS 18 so that a tax charge imposed as a direct substitute for an income tax would be classified in the income taxes category of the statement of profit or loss. This would apply where legislation specifies that a company is required or can elect to pay a specified tax charge instead of an income tax. Specific disclosure and presentation requirements for those tax charges are intended to be introduced.

The IASB expects to publish an Exposure Draft in the fourth quarter of 2026.