International tax planning means development of the most fair tax plan for the taxpayer. Globalization has brought new opportunities for resident and non-resident individuals and legal entities. Depending on our practical understanding the following are useful suggestions for many who really want to decrease taxes.
Reducing your Taxes:
To begin with there’s a selection of standard tax planning principles you should not neglect. All of them are quite applicable to national and international tax planning. The advices includes:
Shift income together with other taxpayers, for instance gift sought following assets to children.
Reduce your earnings to cut back tax amounts. One of many best-recommended ways is saving for retirement.
Make the most of deductions. Those biggest ones are normally mortgage interest, state taxes, and gifts to charity.
Try to acquire a lower tax rate where possible.
Take advantage of tax credits – they don’t really reduce your taxable income, but minimize your actual tax liability.
Consider deferring paying taxes – this could be reasonable oftentimes.
Be mindful of the exempted categories of income, like insurance coverage, gifts-bequests and inheritance, medical insurance, employer reimbursements, and scholarship grants.
Aspects Determining Your Tax Liability:
Putting aside the above listed general rules analyze each of the below aspects which could finally require notable changes of one’s business structure.
Subject of Taxation or Taxpayer. This is an individual or legal entity liable to pay taxes with his/her/its own funds. By changing its legal form the business could get a far more favorable tax regime. A classic example could be a business originally positioned in the kind of a U.S. corporation transformed into a limited liability company (LLC) making a tax-flow regime and therefore eliminating the federal level of corporate taxation.
Object of Taxation. Every tax concerns its independent object of taxation. It can be real estate, goods, services, works and/or their realization along with income, dividends, or interest. Changing the taxable object can cause a significantly much better tax regime. As an example, sale of apparatus has been often replaced giving it into leasing.
You’re liberated to choose your tax jurisdiction. Use advantages of offshore low tax centers identical to beneficial “best attributes” of tax regimes in countries rich in taxes. Several jurisdictions welcome non-resident investments, in exchange for total exemption of taxes and reporting. Some countries favor particular forms of activities attracting investments into specific industries.
Meet with the company and also its management and administration. In addition, perform what they call the “mind & management” test: This may be the key factor to determine tax residency from the company. It totally depends on taxation policies in the countries involved, but the company could be obliged to cover taxes in the country where its “mind and management” is located.
Potential double taxation happens when one country claims the right to tax the income on the basis of residence (or citizenship) of the taxpayer as well as the other country – on such basis as that income stream. In certain occasions it happens because both countries claim the taxpayer getting their resident or the income originates from their sources.
Avoid double taxation by way of possible tax credit, tax deduction and tax exemption options. The majority of existing double tax treaties between countries follows the OECD model tax convention and cover taxes on income and capital in any form. The choice of jurisdiction as per paragraph “Tax jurisdiction” above may often depend on accessibility to the appropriate tax agreement between two countries.
Besides tax treaties numerous western countries have in place special tax regulations allowing for credit from the foreign tax paid even without the according tax treaty in place involving the involved countries.
Double taxation may also take place within the distribution processes from the company’s revenue. It might be first taxed as profits with all the company and later as dividends to the shareholders subject to withholding at distribution.
It’s more advantageous to avoid tax resident status in the country from the most likely profits trying to limit it to withholding tax.
It’s easier to defer withdrawal of funds from business and repatriation of profits. In certain occasions deferral equals tax exemption.
Transfer of assets is far better as movement of capital rather than movement of revenue or profits.
Comparing tax regimes of various jurisdictions observe the process of formation of taxable income aside from the tax rates figures.
Matters you might settle at the conclusive stage of tax planning, for example tax expedient distribution of assets and profits, usually do not relate to tax calculation and settlement directly. However growth and development of priorities in profits accommodation, capital repatriation and investment policy provides for additional tax benefits and some return of paid taxes.
With all this information at hand it is important to discuss your international tax planning with one of our tax specialists. We’re able to discuss and plan in detail several tax organizing and business methods for you to make the best long term decision. Get in touch with us now and let us help prepare you for the future. Here on our site you can contact a skilled international tax planning business advisor and/or Enrolled Agent which will help provide you with all the tools you may need for international tax planning.