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You can use tax expense based expenses to process expenses based on the amount of other expenses. For example, the system can calculate tax expense based expenses based on the daily activities for income, unrealized, and realized gain/loss. You can set up expense based expenses at the total fund level and at the class level. A class level tax expense based expense can have different expense rates for each class.

The system derives tax expense based expenses by applying a fixed rate to the balance of a set of expenses/fees associated with ledger accounts. You can set up a Ledger Activity type adjusted NAV expense rule with criteria that can identify one or more ledger account ranges associated with expenses from the Income Statement, along with long/short criteria. Tax expense based expenses do not use tier rules. Because calculations for tax expense based expenses depend on amounts calculated for other expenses, you do not process tax expense based expenses until the daily profit loss calculation completes. 

For example, you can use tax expense based expenses to calculate a tax expense for interest tax, CGT (realized) tax, or unrealized tax by applying a tax rate on specified ledger balances associated with other calculated expenses. 

To use tax expense based expenses:

  1. Create an adjusted NAV expense rule where the Adjusted NAV Expense Rule Type is set to Ledger Activity. 
    The rule can include one or more ledger account ranges and long/short criteria. For more information, see Create a Ledger Activity Adjusted NAV Expense Rule.
  2. Create a variable expense for an entity that has Tax Expense set to Yes, and a Tax Rate value defined. 
    You can assign the adjusted NAV expense rule to a variable expense at the TF or at the share class level. For more information, see Create a Tax Expense Based Expense. If the tax rate changes as a result of changes in the economic environment, you can edit the variable expense to update the tax rate. 
  3. After processing for daily profit loss calculations completes. process the expense accruals 
    For details, see Run Expense Accruals for Tax Expense Based Expenses 

For an example how the system uses the variable expense's adjusted NAV expense rule to calculate the tax expense based expense, see Tax Expense Based Expense Rule Calculation Example.

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