Ring fence

Tax Glossary Definition

Ring fence

A ring fence refers to a rule or framework in taxation that segregates the income or expenses of a specific activity from the rest of a company’s operations. Its purpose is to make sure that profits from one source are taxed independently, without being reduced by losses or deductions from other business segments.

Example: In the petroleum sector, governments often ring-fence oil extraction profits, preventing companies from using losses in other ventures to lower the taxes owed on petroleum income.

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