TIFD Questions

 

TIFD stands for Tax Index of Financial Data and represents a listing of items commonly reported on balance sheets and income statements. The TIFD is a structured approach for the presentation of financial statement information that accompanies the tax return. It is a list or index, of balance sheet and income statement items that are used to create a unique financial statement combination.

 

 

The TIFD is a TAX index of financial statement information that is intended to regulate the reporting requirements for tax purposes. It provides a new way to collect financial information in a structured format that supports electronic filing. Having financial information in an ordered format allows the Office of the Commissioner for Revenue (CFR) to process returns more quickly and enhances the development of tax policies and legislation by the Ministry for Finance.

 

 

 

Electronic lodgement has been on the agenda for a number of years. However, it could not be implemented due to the prevailing legal structure. The CFR announced its intention to introduce electronic filing during a seminar held on 24 February 2000. Later in the year a spreadsheet version of the 2000 tax return was developed and provided by ​CFR.

 

 

The outcome was very encouraging; more than half of the company tax returns filed were in the spreadsheet format. This meant that data processing was much smoother and the various validations incorporated within the spreadsheet helped to reduce mistakes in determining the tax liability.

 

 

The CFR developed the TIFD to standardise the preparation and presentation of financial statement information that supports electronic transmission.

 

 

The CFR set up a project team to identify ways aimed at improving the internal processing system. The diversity of financial statement layouts encountered does in no way support electronic filing. A preliminary exercise, reviewing a number of financial statements filed with company tax returns, revealed that financial data was being presented in a multitude of formats.

 

The diversity of financial data presented, hinders data capture. Furthermore, certain data presented is very unclear, vague and subject to interpretation. This led the department to single out the most commonly used financial statement items, attaching a unique code number to each item.

 

 

 

The TIFD is designed to cater for the reporting needs of all persons defined in the Income Tax Act, that are required to file some form of financial statements with their tax return. However, the TIFD is only mandatory in the case of persons falling within the definition of a company with some exceptions.

 

 

The TIFD does not meet the reporting needs of Insurance Companies. These have their particular reporting requirements that are regulated by the Insurance Business Act. Trusts are also excluded in view of pending legislative changes. These categories should continue to submit a paper copy of the financial statements along with their tax return and prescribed attachments.

 

 

The TIFD is not required from non-resident companies that do not normally attach financial statements to their tax return. This applies ONLY to those foreign companies having no income arising in Malta that is chargeable under Article 4(1)(a) of the Income Tax Act [income from any trade or business...]. However, where such companies are registered for income tax purposes they are still required to file their tax return and attachments relating to income arising in Malta [e.g. dividend warrants].

 

 

5. What are the Tax Reporting requirements of non-trading companies?

 

In the case of non-trading companies, including companies in liquidation, the TIFD is still required. Use the TIFD to file balance sheet information if there is no income statement to file. However, all inactive companies that have some form of income, or incurred expenses during the financial year, must still file the income statement coded in TIFD.

 

 

The use of the TIFD is mandatory for company tax returns due to be filed on 30 September 2002 and later. You must use the TIFD whether you file electronically or a paper copy. If a company opts for a manual tax return, a paper copy of the financial statements coded in TIFD, must accompany it. [For transitory arrangements see Appendix IV]

 

 

 

The CFR is committed to capture financial statement information from all companies in a format that supports electronic filing. To do so, the elements of the financial statements had to be encoded.

 

 

We designed the TIFD as an alternative means of submitting financial statement information. This means that it is a requirement that financial statement information be presented in TIFD format. Companies that do not comply with this requirement will have their return rejected and the CFR will follow up with a request for TIFD-formatted financial statement information.

 

 

Absolutely not! The TIFD is a tool to report balance sheet and income statement information in a uniform structure that allows the CFR to automate validation and processing.

 

The TIFD is only a part of a larger package within a platform establishing a number of electronic interactive services provided by the CFR for the benefit of its customers.

 

 

When the whole arrangement is in place it will provide time saving opportunities, faster and higher quality processing, reduced paper costs and real time electronic acknowledgements.

 

Accountants, auditors and tax practitioners will be able to query returns, have access to tax information and will receive prompt attention from the ​CFR as more and more information is provided online.

 

CFR will also benefit from the arrangement. Electronic filing will reduce the manual data capture. Automation will include a series of front-end validations that allows us to process data more quickly and accurately. This will reduce paper handling and resolve, at least in part, the archiving problems including storage costs.

 

 

Taxpayers benefit because the CFR works more efficiently by employing technology to improve upon the services it already provides.

 

 

 

We want exactly the same information as before, but in a coded format. The financial data must satisfy all the requirements set by the Companies Act, 1995. You will continue to determine how to structure and present the audited accounts. TIFD codes are then matched and applied to items on balance sheets and income statements.

 

 

 

Generally, the reporting requirements are not increased; you report the same level of detail as you did before. You only need to select TIFD codes for the usual information contained in the financial statements that are filed with the income tax return.

 

 

The TIFD is a tool to collect the same financial information that is presently being filed. We want nothing more than we receive now, but no less detail. All that is required is the code rather than words, and the corresponding amount for each item currently reported in the audited financial statements.

 

 

In the new processing redesign we endeavoured to keep text data to a minimum. The directors' report, the audit report and the notes to the accounts are not immediately available with electronic filing. The CFR can still request a paper copy of the full set of audited accounts. It can also access these documents later on, when the annual audited accounts are provided to the Registrar of Companies.

 

 

The CFR is in no way compelling anyone to change, or to set up, a new chart of accounts. Everyone is free to use TIFD codes when setting up charts. However, the TIFD by itself may not meet all the charting requirements.

 

 

In designing the TIFD, we analysed a large sample of financial statements. Our goal was to provide companies with as much flexibility as possible, while still allowing us to receive and process financial statement information electronically.

 

 

The TIFD provides about 500 items to choose from. The level of granularity is primarily intended to provide an adequate number of items that cater for different circumstances and minimise reporting and allocation errors. It is expected that most companies will report between 40 and 80 items.

 

 

 

The CFR has informed companies about the TIFD in a circular and held a number of seminars on the subject. In addition, information about the TIFD will soon be available on our web site.

 

 

 

The TIFD does in no way impair the present responsibility relationship between directors and auditors. The same will apply for the electronic filing of returns.

 

 

Audited financial statements must still be prepared with the same level of detail as before. They must be approved and signed before the electronic transmission of the tax return and financial data. Specific questions within the tax return must be answered to confirm full compliance with the statutory procedures.

 

 

There will also be the necessary statutory safeguards that enable the Commissioner for Revenue to request within a short period of time, a signed set of audited financial statements to make the necessary verifications.

 

 

 

The TIFD consists of items that are included in the balance sheet and the income statement. It is divided into sections and sub-sections comprising blocks of financial data.

 

 

The item at the start of each block is bold written and represents the general term for descriptions of specific items included within the same block.

 

 

16. Why are mandatory fields included in the TIFD?

 

Certain line items are required to validate financial statement information. These fields do not represent the minimum number of items that must be TIFD-coded and filed with the CFR. These mandatory fields must be included, along with all the other TIFD codes needed to represent a company's financial statements.

 

 

 

 

It is very unlikely that a company is requested more information on the basis of the TIFD codes selected. Cases are selected for further review based on a wide range of criteria, just as they are now. We will analyse data in relation to the financial information reported, and not the codes used.

 

 

When you find more than one code for your items, you should select the code for the most significant item. If three or more TIFD items are combined on one line, you may prefer to use the appropriate generic code from the TIFD to report the amount.

 

 

No, the TIFD has been designed to be flexible. If additions are necessary, [e.g. new statutory disclosure requirements] these can be made to the index without changing the current codes.

 
 

The CFR will provide a spreadsheet(s) that include(s) the TIFD component. If you use an accounting software package, you can report your financial statement items in TIFD format by means of a translation table that you have to prepare. It is impossible for the CFR to support the whole range of accounting software packages in use. However, you can still prepare your return together with the financial statements using the spreadsheet(s) that will be provided by the CFR.

 

 

The information that is normally disclosed by way of a note, is either:
◦included within the TIFD itself [e.g. comprehensive list of fixed assets]; or
◦through the extended questionnaire within the company tax return [e.g. whether there have been any changes in the accounting policies during the year, whether there were any contingent liabilities, etc.]; or
◦in the prescribed attachments to the tax return [e.g. proceeds on the disposal of assets will be reported on prescribed attachments for balancing statements].

 

 

The extended questionnaire within the tax return will ask whether the audit report has been prepared and whether it is qualified. If the audit report is qualified you will be required to state the reason for the qualification.

 

 

If you still prefer to file the paper copy of the return, the accompanying financial statements must be TIFD coded including all notes explaining the balance sheet and income statement details.

 

The CFR is still offering the spreadsheet option to manual filers. However, it would be futile to file manually when such spreadsheets are resorted to.

 

 

Yes, a new version of the company tax return, form TA2, together with prescribed attachments, has been prepared. The new return has been adjusted to cater for the legislative changes, mainly brought about by the Business Promotion Act. Another slight adjustment relates to the reconciliation of profit per financial statements to chargeable income [previously under part 3]. This has been replaced by a similar exercise that will now precede the tax computation for the sake of continuity and data flow.

 

The major innovative feature of this year's return is the extended yes or no questionnaire dealing with the preparation and the audit of the financial statements. With electronic filing, the directors' report, the audit report and the notes to the accounts will not be immediately available to the department. The CFR is still interested in all the financial statement information.

 

Otherwise, the new company tax return will retain the present structure and format with 8 pages and 7 parts.

 

 

All sorts of tax schedules, statements and computations are attached to company returns, the most common being the capital allowance schedules. The information contained in these documents is vital to the department, but the different layouts and the level of content presented, creates plenty of problems during the data capture stage.

 

This state of affairs, if left unchecked, would continue to slow down processing and will ultimately obstruct the electronic transmission of tax returns. To resolve this problem the department is preparing an extensive list of prescribed attachments to the tax return in order to get all the tax relevant information in a standard format.

 

 

You can get printed copies of the guide from your Company Taxpayer Services Office Block 1, Floriana.