Can A Witholding Of Finance B Taken Without You Agreeing Lower Your Taxes With International Tax Planning

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Lower Your Taxes With International Tax Planning

International tax planning entails the development of the fairest tax regime for the taxpayer. Globalization has brought new opportunities for both resident and non-resident individuals and legal entities. Based on our practical experience, the following are 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 must never neglect. All of them are quite applicable at the national and international level of tax planning. Tips include:

  • Reduce your income to reduce taxes. One of the most recommended ways is to save for retirement.
  • Be aware of exempt income categories such as life insurance, inheritances and gifts, health insurance, employer reimbursements, scholarships, etc. However, remember that it is the recipient who gets them free of income tax.
  • Make the most of deductions. The biggest ones are usually mortgage interest, state taxes and charitable gifts.
  • Take advantage of tax credits – they don’t reduce your taxable income, but they do reduce your actual tax liability.
  • Try to get a lower tax rate whenever possible.
  • Consider deferring tax payments – this can be reasonable in many cases.
  • Transferring income to other taxpayers, for example, giving away highly valued assets to children.

Aspects that determine your tax liability

In addition to the general rules listed above, consider each and every aspect of the following that may ultimately require significant changes in your company structure.

Object of taxation. Each tax is related to its own independent tax object. They can be real estate, goods, services, works and/or their realization as well as income, dividends, interest. Changing the taxable object can lead to a better tax regime. For example, selling equipment is often replaced by leasing it.

Tax Subject or Taxpayer. It is a natural or legal person obliged to pay taxes with its own funds. By changing its legal form, the business can obtain a more favorable tax regime. A classic example is a company originally created in the form of a US corporation transformed into a limited liability company (LLC) with a tax flow regime and thereby eliminating the federal level of corporate taxation.

Fiscal jurisdiction. You are free to choose your tax jurisdiction. Use the advantages of low-tax offshore centers as well as the beneficial features of tax regimes in high-tax countries. Several jurisdictions welcome non-resident investors in exchange for full tax and reporting exemption. Some countries favor certain types of activities that attract investment in specific industries.

Choosing between low tax centers, looking for a favorable offshore jurisdiction for trade and verification of professional services Dominica or Seychelles first, for financial companies and insurance companies to consider BVI, Cyprus, Panamafor ship management and maritime operations – Cyprus, Dominica, Nevis or Panamafor licenses and franchises – Cyprus, Gibraltar, Panama, etc. It is very likely that you will find a suitable option for you among the existing offer. But be aware that some companies are not really mobile when it comes to changing jurisdictions.

Location of the company and its management and administration. They also call it a “mind and management” test. This can be the key factor in determining the tax residence of the company. It totally depends on the tax policies of the countries involved, but the company may be liable to pay taxes in the country where its “mind and management” is located.

Double Taxation

potential double taxation occurs when one country claims the right to tax income based on the residence (or citizenship) of the taxpayer and the other country, based on that source of income. Sometimes it happens because both countries claim that the taxpayer is their resident or the income comes from their sources.

Avoid double taxation wherever possible tax credit, tax deduction e tax exemption options. Most existing double taxation treaties between countries usually follow the OECD tax treaty model and cover taxes on income and capital in any form. The choice of jurisdiction under the paragraph “Tax Jurisdiction” above may often depend on the availability of the appropriate tax agreement between two countries.

In addition to tax treaties, there are several developed countries special fiscal regulations allowing the credit of the foreign tax paid even without the corresponding tax treaty in force between the countries involved.

Double taxation can also take place within the company’s income distribution processes. It may be taxed first as company profits and later as dividends to shareholders subject to withholding on distribution. Please refer to related local law for a possible remedy for this case.

Practical advice

  • It is more beneficial to avoid the status of tax resident in the country of the highest profits trying to limit it to retention.
  • it’s better postpone the withdrawal of funds of business and repatriation of profits. In some cases, the deferral is equal to the tax exemption.
  • Asset transfer is more preferable as capital movement rather than revenue or profit movement.
  • When comparing the tax regimes of different jurisdictions, pay attention to the process of formation of taxable income in addition to the tax rate figures.

The issues that you must resolve in the concluding phase of tax planning, such as the distribution of tax benefits of assets and profits, are not directly related to the calculation and settlement of taxes. However, developing priorities in profit accommodation, capital repatriation and investment policy provide for additional tax benefits and some refund of taxes paid.

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