International tax planning means development of the most fair tax regime for the taxpayer. Globalization brought newopportunities for both resident and non-resident individuals and legal entities. Based on our practical experience the followingare useful tips for those who want to save on taxes.
How to Lower Your Taxes
First of all there are a number of
standard tax planning principles
you should never neglect. All of them are quite applicable tonational and international levels of tax planning. The advices include:Reduce your income to reduce tax amounts. One of the best-recommended ways is saving for retirement.Be aware of the exempted categories of income, like life insurance, gifts-bequests and inheritance, health insurance,employer reimbursements, scholarship grants etc. However, remember it is the recipient who gets them income tax free.Make the most of deductions. Those biggest ones are normally mortgage interest, state taxes, and gifts to charity.Take advantage of tax credits – they don't reduce your taxable income, but reduce your actual tax liability.Try to get a lower tax rate where possible.Consider deferring paying taxes - this can be reasonable in many cases.Shift income to other taxpayers, for example gift highly valued assets to children.
Aspects Determining Your Tax Liability
Apart from the above listed general rules, analyze each and every of the below aspects that may finally require notable changesof your business structure.
Object of Taxation.
Every tax relates to its own independent object of taxation. It can be real estate, goods, services, worksand/or their realization as well as income, dividends, interests. Changing the taxable object may lead to a better tax regime. Forexample, sale of equipment is being often replaced by giving it into leasing.
Subject of Taxation or Taxpayer.
It's an individual or legal entity liable to pay taxes with its own funds. By changing its legalform the business may get a more favorable tax regime. A classic example is a business originally set up in the form of a U.S.corporation transformed into a limited liability company (LLC) having a tax-flow regime and thus eliminating the federal level ofcorporate taxation.
Tax jurisdiction.
You are free to choose your tax jurisdiction. Use benefits of offshore low tax centers same as beneficialfeatures of tax regimes in countries with high taxes. A number of jurisdictions welcome non-resident investments in exchangefor total exemption of taxes and reporting. Some countries favor particular types of activities attracting investments into specificindustries.Choosing between low tax centers, looking for an offshore jurisdiction favorable for trading and professional services check
Dominica or Seychelles
first, for financial holding companies and insurance business consider
BVI, Cyprus, Panama
, for shipmanagement and maritime operations –
Cyprus, Dominica, Nevis or Panama
, for licensing and franchising –
Cyprus, Gibraltar,Panama
, and so on. It's very probable that you'll find a suitable option among the existing offers. But have in mind that somebusinesses are not really mobile in terms of changing jurisdictions.
Location of the company and of its management and administration.
They also call it "mind & management" test. This maybe the key factor to determine tax residency of the company. It totally depends on taxation policies of the countries involved,
Leave a Comment