What is the purpose of tax planning

Tax planning and tax optimization

Table of Contents:

Tax planning and tax optimization are an important part of doing business. These are legitimate measures a company takes to reduce the tax burden: fees, levies, mandatory payments. You can achieve the goal through perks, deductions, a lower rate, the right to a refund.

It is important to deal with optimization and tax planning at every stage of the operation since the company was founded. With a competent approach one can develop a structure of the organization that will meet several requirements at the same time: efficiency in terms of profit, minimization of tax payments and transparent management.

In order to reduce taxation, it is necessary to analyze the current situation of the company, study the applicable laws and choose the optimal and legitimate way. It is best to entrust this task to specialists, as the price of error can be too high for the company.

What is optimization and tax planning

Optimization and tax planning are interrelated processes. In order to reduce, i.e. optimize, the mandatory payments, it is necessary to competently plan the work processes and financial activity of the company.

Optimization tax planning is an act of a taxpayer to reduce payments and establish the level of obligations with the aim of determining real income and managing it. One of the goals is to choose the optimal form of taxation and to reduce the tax burden on the company. It is important that the ways and methods of achieving the goals do not go beyond legislation, otherwise tax evasion will be involved.

One particular method of minimizing payments is called a tax system. It includes a description of the economic measures that will allow you to apply a favorable regime and save on paying taxes. The taxpayer is free to choose the organizational and legal form of economic activity and the tax system. He can also select suppliers and partners at his own discretion and negotiate the terms of cooperation with them.

The main objectives of fiscal management:

  • legal reduction of the tax burden;
  • Minimizing tax losses on a given tax or total tax;
  • Increase in working capital and, as a result, increase actual opportunities for development of the organization and improve efficiency.

The generally accepted method for determining the fiscal burden is the calculation method developed by the Ministry of Finance. It defines the amount of payments as the ratio of all taxes paid by the organization to sales. In practice, when reducing the tax burden, the offset amount for the accounting period is often used instead of the amount of tax paid.

The tax authorities see the low burden compared to the industry average as a circumstance that could indicate tax evasion and thus the likelihood of a review. There is even a special term for such cases: the tax gap, i.e. the difference between the amount of taxes that theoretically have to be paid by the taxpayer and the amount of the actual payments.

Accounting policy

A rationally structured accounting policy has a good effect on corporate taxation. For example, the amount of expenses, and therefore the amount of profit, are influenced by such elements of accounting policy:

  • Methods of crediting the amortization of fixed and intangible assets;
  • Methods of valuation of raw materials and materials in depreciation in production, as well as the cost of goods in implementation;
  • Method of evaluating the remains of the unfinished construction production, the remains of the finished production.

One of the beneficial aspects for taxpayers is legal permission to create a range of reserves into which deductions can be made as the company's expenses. However, it is important to take into account that when forming an accounting policy, the choice of this or that variant of calculating the tax base can be secured and justified. Why do we pay attention to this possibility? Because with informed reasoning, it is not difficult to reduce the risks.

When choosing methods of determining income and expenses, recognizing, evaluating and distributing them for tax purposes, keep in mind that some are different from accounting methods. Therefore, separate the accounting and the tax invoice right from the start.

Strategy and tactics

Measures to reduce payments should cover all areas and aspects of the activity. A qualified professional will suggest a strategic and tactical plan to optimize the tax burden. Strategy is the long-term course, solving major company tasks while taking tax interests into account. Tactics concern everyday tasks and operations.

The strategic plan includes:

  • overview of case law and legal framework conditions in a certain area as well as long-term forecast of changes;
  • Forecasting tax circumstances and force majeure, developing an action plan for each of the emergencies;
  • Schedule for meeting the company's financial and commercial obligations;
  • Assessment of the risks and likely reasons for deviations from the calculated indicators;
  • detailed justification of the chosen scheme, taking into account the risks and consequences;
  • Forecasting effective optimization tools.

But the main task of the strategy is to choose such a tax system that best suits the specifics of the company and helps to reduce the fiscal burden. The tactic is aimed at effectively solving the current problems. It includes the monitoring of legal acts affecting the tax area and the industry, short-term forecasts, schedule for the fulfillment of obligations and changes in assets.

The tactic puts more emphasis on each and every business: studying the conditions, predicting the impact, and assessing the risks. To keep the tactic effective, it is revised at least once a month. It is impossible to independently develop an effective strategic and tactical plan, the support of experts is necessary.

Steps to reduce the tax burden

The essence of optimization is reducing payments and choosing the most effective, safe tax system. If you haven't thought about the tax burden at the time of founding the company, the first step in optimization is likely to be a complete or partial reorganization of the company. Because it is necessary to choose a tax system that best suits the company's objectives.

Experts first determine the general direction of the work, that is, they form a strategy. And only then is the tactic reorganized. The first steps in choosing a strategy are risk assessment, analysis of fiscal problems, selection of the most important planning tools and development of a schema. The company's activity is already planned taking into account the new tax scheme (which is why it is often necessary to reorganize the business).

Tax risks are the likelihood of an increase in payments, the possibility of criminal liability or control by the administrative authorities. Sometimes entrepreneurs unintentionally violate the law because they misunderstand the intricacies or because they don't track the changes. It is therefore important to consult experts whenever there is a change in fiscal regulations and payments in order to clarify possible risks. It is essential that all decisions are made in the legal area.

Before the introduction of the new regulation, savings potential and costs should be compared and it should be ensured that all changes are justified in writing. Every operation that the company carries out must be documented. In the event of a review by the supervisory authorities, only careful documentation will help to prove that all operations were justified and carried out in compliance with the wording of the law.

Efficiency of tax optimization planning

The most effective tools for reducing the tax burden are well-known tax schemes. With their help, one can significantly reduce the total amount of mandatory payments. But the effectiveness of the scheme cannot be assessed only in terms of reducing the tax burden. Legal risks are no less important. For example, recovery and post-audit sanctions can be much greater than the sum of the savings, not to mention such a serious risk as criminal law.

The effectiveness of the tax system does not depend so much on the savings in the payment of taxes and contributions, but on the evidence base developed to justify the chosen scheme. The basis of the evidence base is such a concept as tax break retention. This term refers to the reduction in the amount of tax liability due to the reduction in the tax base, receipt of the deduction, discounts, application of a lower rate, and the right to a refund or a refund from the budget.

It is important to note that regulators can challenge any civil transaction that affects taxation. That is why the justification of the chosen scheme is so important. Tax planning and tax optimization must take into account not only formal compliance with the law, but also other circumstances related to transactions and dealings that may affect the legal risks.

The unfounded benefit can be evidenced by the proven arguments of the tax authority about the presence of such circumstances:

  • Impossibility of conducting taxable operations taking into account the time, location of property or the amount of material resources economically necessary for the production of goods, works or services;
  • Lack of necessary conditions for achieving the results of the corresponding economic activity due to the lack of management or technical personnel, fixed assets, production facilities, storage rooms, vehicles;
  • Accounting for tax purposes only of economic transactions directly related to the accrual of tax benefits, if the selected activity also requires the execution and recording of other transactions;
  • Transactions in goods that were not manufactured or could not be manufactured to the extent specified in the accounting documents.

When choosing the optimization scheme for tax planning, it is necessary to observe the recommendations:

  • Economic transactions must be economically justifiable and correspond to the standards of entrepreneurial activity;
  • the actual content of the economic transactions and organizational and administrative acts of the taxpayer should not differ from his documentation;
  • When creating different tax planning schemes, the interdependence of the transaction participants should be avoided;
  • when concluding contracts, it is necessary to check the prices of goods (works, services) specified in the transaction in order to exclude the possibility of the revision of prices in court by the tax authorities.

Qualified help with the tax bill

VALEN offers a full range of services related to fiscal consideration, establishment of the tax system and reduction of payments:

  • Analysis of accounting and legal certainty of the company's activity;
  • Detection and assessment of risks;
  • Elaboration of recommendations for the implementation of fiscal planning;
  • Evaluation of the economic effectiveness of changes;
  • Develop a step-by-step plan for the implementation of optimization techniques;
  • Choosing a suitable fiscal scheme.

For advice, leave the application on the website or call: + 7 (495) 7-888-096!

Author of the article

You might also be interested