Tax obligations are usually one of the biggest headaches for most individuals and companies. Whether as citizens or as entrepreneurs, we have surely thought on more than one occasion: Is it possible, while acting within the strictest legality, to pay fewer taxes? Am I paying more taxes than I should? Questions that, perhaps, would not overwhelm us so much if we had carried out adequate tax planning with sufficient anticipation.
And it is not a trivial question; the expenses for the different fiscal concepts can represent a considerable amount of money on the revenues of the companies. Therefore, just as we try, as far as possible, to save on each and every one of the costs involved in our production process, tax costs should not escape our control.
Through tax planning, you can reduce the impact they have on your economy. Don’t know what tax planning is? Don’t worry, below we will tell you what it is and the benefits of having effective tax planning.
Understanding Tax Planning: What is it?
Tax planning is a financial, tax, and accounting strategy with the purpose of optimizing the tax burden by taking advantage of the benefits, exemptions, deductions, and tax advantages provided by the tax legislation. The objective is to minimize the tax burden and therefore maximize the deductions to which you are entitled.
Tax planning analyzes and designs the most favorable map for a company or individual. The idea is to be better prepared and have control over the impact that tax obligations will have on your family or company’s economy. Apart from being aware of the most opportune moment to face them.
However, to achieve this, the planning always acts within the margin of legality. It is completely legal and transparent and is not associated with tax evasion, so you should not be afraid of tax audits if you really apply it properly.
Why is Tax Planning Important?
Having a tax strategy offers benefits that go beyond tax savings. Good tax planning can help individuals and businesses manage their finances more effectively, avoid overpaying, and increase their assets.
With the complexity of the tax code, first-time taxpayers may find it difficult to understand unfamiliar areas. But, taking the time to devise tax planning strategies could put them in the best possible position for growth. Let’s explore four benefits business tax planning can bring you.
4 Advantages of Tax Planning
Having said this, let’s look at some of the advantages of incorporating tax strategies in every company.
- A Reduced Tax Bill
Let’s start with the most obvious reason, since the main reason for tax planning is to be able to optimize your tax liability. By planning, we can take advantage of deductions and credits, and thus have more money to reinvest back into your business.
If there is a more tax-efficient way to manage your assets, shouldn’t you consider it? However, many people don’t take this into account and, without realizing it, end up paying more than they should.
By considering all the possible tax-saving alternatives, you can improve your company’s cash flow and become more profitable.
- Strategic Decision Making
Good corporate planning also includes good tax planning with clearly defined objectives. With greater decision-making power over all areas of the company, you can better control its key issues, such as tax payments.
- Eliminate Tax Litigation
Tax planning manages to save the taxpayer the maximum amount of taxes, but in compliance with the provisions of the tax laws. This makes it possible to minimize any litigation.
Apart from tax evasions, there are several types of litigation that local tax authorities can bring against you in a court of law. Some of them can commonly come from providing incorrect information and other misstatements. But, planning your tax strategy correctly would allow you to minimize litigation and save you from legal liabilities.
- Increase Productivity
To make solid investments, projections, situation analyses, and risk tolerance, analyses are often performed. But without effective tax planning, returns can be diminished by taxes that could have been avoided or at least significantly reduced.
When assessing investment performance, what matters are the “real” returns after deducting tax and other factors such as inflation. And the tax burden may be greater or lesser depending on the type of investment.
Effective tax planning helps to ensure that rather than allocating funds to rushed and often wrong investments, tax-saving investments are made. This ensures the optimal use of resources for productive causes.
How to Get Started: Hire a Professional Tax Advisor
Tax planning pursues savings allowed under the law, while taking into consideration the investment approach, and is therefore done on an organization-specific basis, rather than separately.
It is an essential part of the companies’ corporate planning and not an after-the-fiscal-year-end activity. If time is allowed to pass, benefits that would reduce taxable income are wasted.
It is not a simple matter. There are many variables that must be analyzed to create a great tax planning strategy. From the company’s objectives and strategic plans to the taxation of non-resident agents, double taxation treaties, and tax rules of the country.
One of the best things you can do to strengthen your financial health before the end of the year is to consult a tax advisor. At Gierbolini Consulting we have experienced tax professionals to help you discover effective tax planning strategies for you. With an up-to-date plan, your tax burden will be managed accurately and efficiently.
If you would like us to assist you in your company’s tax planning, please contact us.