Returns should be cal net of non-reclaimable withholding tax on div, int income and capital gain. Reclaimable tax should be accrued. My question is: So what is the diff betw non-reclaimable and reclaimable w/tax? From my understanding, in accounting, to be accured mean any charge to the PL should be reversed and put to tax recoverable account on the bal sheet? Is that the same understanding here? Otherwise there will be no diff in treatment betw non-reclaimable and reclaimable w/tax. What do you all think? Thanks
Here is my understanding. Sometimes on a foreign investment withholding taxes are automatically taken out of the portfolio. If they are going to be put back into it (reclaimable) then you should not calculate performance as though they are gone. If you AREN’T going to get them back (non-reclaimable) then it is a true tax to the portfolio and the returns should reflect that fact.
Thanks, this treatment in fact is consistent with international financial reporting standards. Meaning those exp that are recoverable does not get into the PL. Or exp that is earned but not yet received need to be accrued (i.e. interest income etc).