Online TAB Calculator
The TAB relates to the benefit arising from an (hypothetical) amortisation of an acquired asset if the amortisation would be or is recognisable as expense in the tax statement.
In consequence, the size of the tax benefit will depend on the applicable tax rate.
However, as the amortisation is often only hypothetical in nature (e.g. under a share deal, acquired assets will not be recognised under the tax balance in general), we would recommend to use the applicable nominal tax rate of the relevant tax jurisdiction where the asset is located.
An effective tax rate may be not appropriate as this might be influenced by tax loss carry forwards which relate to the company but not to the asset itself.
The TAB relates to the benefit arising from an (hypothetical) amortisation of an acquired asset if the amortisation would be or is recognisable as expense in the tax statement. In consequence, the size of the tax benefit will depend on the applicable amortisation period. The applicable period may differ among jurisdictions and assets considered. We have collected information for different assets and jurisdictions.
They are summarized under Tax Amortisation Benefit. Please note: our calculation oft he TAB factor assumes linear amortisation.
The TAB relates to the benefit arising from an (hypothetical) amortisation of an acquired asset if the amortisation would be or is recognisable as expense in the tax statement. As the tax benefit will arise over a period in the future and assumes a taxable profit which would allow for the full tax deductibility of the amortisation, the corresponding cash flows may be uncertain. Thus, the benefit has to be discounted with an risk adjusted discount rate, i.e. The discount rate for valuing the present value of tax savings due to amortization should be proportional to the risk of the future benefits. In practice, it is common to apply the discount rate of the asset itself (if the asset is valued with an income approach).
However, there might be good arguments to use a different discount rate as the realisation of the amortisation benefit might be less risky (ultimate counterpart are the tax authorities, i.e. the government with a low or neglectable default risk in general).
The TAB relates to the benefit arising from an (hypothetical) amortisation of an acquired asset if the amortisation would be or is recognisable as expense in the tax statement. As the tax benefit will arise over a period in the future the timing of the cash flows can influence the present value. For practical reasons, we allow for two different timing assumptions, i.e. mid-year or end-year.
Mid-year option will lead to a slightly higher TAB factor as the benefits are assumed to be received earlier.
The resulting TAB factor is the present value of the tax benefits of an asset with a certain fair value / purchase price. It is not stated in absolute terms but rather in relative terms and can be used as follows:
Step 1: Value the asset in the absence of amortization benefits. This is done by calculating the present value of the after tax cash flows attributable to the asset, where the cash flows do not reflect amortization charges in the tax calculation. Then apply step 2.
Step 2: Incorporate the present value of tax savings due to amortization by "grossing up" the value (from Step 1) by the resulting TAB factor. Make sure that the assumptions for the calculation of the TAB factor are appropriate for the asset under consideration.
