Tax planning is an important task which every business must perform in order to ensure tax regulations are complied with while at the same time ensuring that no excess tax is paid. Tax planning primarily involves the following activities:
A sound tax planning policy document will not only help a business to identify the areas which have the potential to create tax litigations but will also help in identifying the key areas to minimize the tax burden.
Many large corporate houses perform tax planning at the beginning of the year which is reviewed at frequent intervals to ensure that various channels within an organization are updated about changes in tax regulations and create a road map for implementing them during the course of the day-to-day business activities.
International tax planning is defined as a tax-driven proactive arrangement of a person’s affairs to minimize his tax results. It can generally be optimized when the after-tax profit is maximized. Besides reducing the overall effective tax rate, it can also lead to tax deferral and reduction in tax compliance costs. It looks at both the tax-saving opportunities and even tax risks such as double taxation and prospects tax legislation.
Tax is not a primary or overriding factor in the decisions to engage in overseas business activities or invest abroad. These decisions are usually made on factors such as business viability, availability of resources, market access, and market potential. Some other factors include political and economic stability, government grants and incentives, business infrastructure, geographical location, availability of skilled and low-cost workforce, stable currency, etc. The decisions are based on economic, commercial, even social and political considerations.
However, after making the decision, the tax becomes a critical business consideration. Many multinationals consider the tax rate on business profits as a decisive factor in deciding the country to start their business. Other primary concerns are the availability of treaties and the quality of tax administration. These factors influence the long-term financial viability of the company and the ultimate return on the investment.
When tax planning is done inside the legal frameworks, it is fully legal and in fact a smart decision. However, using shady techniques to avoid tax payments is illegal and the business may get into trouble for doing so. Tax saving practices include tax avoidance, tax evasion and tax planning. Out of these tax planning is the only legal manner of reducing the tax liabilities. The government offers the different opportunities to save on taxes with the intention of reducing tax burden on a taxpayer through legal tax planning methods.
Corporate international tax planning is a major challenge for companies that do business in multiple countries. To be aware of pitfalls such as international double taxation — being taxed for the same income in two different countries — they must plan strategically. Such planning is also crucial for staying compliant with tax laws in each country in which they operate, laws and regulations that are complex, vary widely among each country’s jurisdiction, and are often changing. To further complicate things, many countries’ regulations are increasingly subject to digital e-filing requirements.
Corporate tax law and planning — especially on an international level — is far too complex to manage properly without powerful, effective software on your side. Staying on top of changes in e-filing requirements, deadlines, penalties, and international agreements to prevent double taxation requires robust technology tools that can keep up with these changes.
The key focus area for MIA is to develop the knowledge base which will support the clients and help them in overcoming the challenges that lie in the course of tax planning.
MIA has developed special teams that will act as expert groups in tax matters with particular focus on various business sectors. At MIA, every business is analysed thoroughly and proper care is given in arriving at conclusions while developing the tax planning document. MIA provides end to end solutions in tax planning. Please feel free to contact us should you have any queries