To become successful and conduct a business profitably, it is important for the company not only to seek new ways to increase its income, but to also strive to competently reduce its costs.
One of the main sources is, of course, tax deduction. In order to reduce and optimize these costs, the company will need to implement a competent tax planning system. Often, the stage of tax optimization includes the use of a zone of preferential taxation.
How can it help optimize taxes? Let's begin with the “basics”. It is no secret that all companies, both small and large, participate in international trade, import and export goods, or perform international financial transactions.
Increasingly, the eyes of modern businessmen are turned to the system of corporate international tax planning. When the risks for local companies begin to increase rapidly, the relevance of this system increases even more.
We are talking about risks in terms of the instability of tax legislation, the crisis stages that the global economy is experiencing with enviable regularity, higher tax rates, and an increased burden on entrepreneurs. To reduce the impact of all these risks, and at the same time increase business efficiency, companies can turn to countries in which the tax climate is more favorable.
The tax legislation of different countries varies, not only in terms of tax rates, but also in terms of their collection methods. Thus, in a completely legal way, a company can reduce the tax burden, and at the same time, increase its profitability indicators.
Very often, in order to achieve better results and financial goals, companies have to use tax planning experts, relying on their experience. This is the right decision, especially when they turn to real professionals, and not to those who only impersonate them.
Returning to the issue of tax planning, it is worth noting two key approaches to reducing taxes in the company:
1. Aggressive, direct tax evasion
This approach is somehow “old-fashioned”, but still working, and having a number of corporate risks, at least in those companies that operate under their local legislation. Many companies still use this particular method of reducing the tax burden, without even fearing the consequences, in which case it is necessary to constantly keep abreast and have a certain plan “B”.
An example of such an approach can be an artificial increase in the level of costs, an unnatural decrease in revenue and export prices (for tax authorities), an attempt to show that the company is not functioning, while its activity continues and is even gaining momentum.
Such schemes work only under certain circumstances and with some understanding of the current situation with automatic exchange of information, bank loyalty to payments of non-residents, etc.. As a rule, they often have to be adjusted and changed depending on the situation. After all, taxes are an important source of replenishment of the state budget, meaning there will always be an active struggle between businesses and the state. Serious companies, who care about reputation, will never use aggressive tax avoidance schemes.
2. A loyal tax planning
It consists in the competent construction of an international planning system. Companies that use this approach give preference to even more complex, but at the same time completely legal ways of doing business. They reduce their taxes by applying some gaps in the tax laws of other countries, but without violating the law, so there can be no complaints against them. Everything is organized legally, competently and clearly, taking into account all issues.
At the same time, it is important to understand that each company is unique in its own way, and what schemes that work for one enterprise will be completely inapplicable for another. Therefore, it is important to develop tax planning schemes individually, taking into account all aspects of the company. That is why the development of such schemes must be entrusted to professionals.
Using the zones of preferential taxation as a tool for international tax planning is possible, but requires a lot of attention. Otherwise, this tool may not bring profit, but only losses of money and time.
For a long period, low-tax jurisdictions have been considered almost the best way to reduce the tax burden for small and medium enterprises. Due to lower tax rates and specifics of the tax legislation of these zones, enterprises are increasingly using this tax optimization scheme.
Need more help with offshore tax planning schemes? Our team of professionals is here to help you with that!
