International tax planning means the development of the fairest tax regime for the taxpayer. Globalization brought new opportunities for resident and non-resident natural and legal persons. Based on our practical experience, the following are helpful tips for those who want to save on taxes.

How to reduce your taxes

First, there is a series of standard tax planning principles you must never neglect yourself. All of them are quite applicable at the national and international level of tax planning. Tips include:

• Reduce your income to lower tax amounts. One of the best recommended ways is to save for retirement.
• Consider exempt income categories, such as life insurance, gifts-bequests and inheritances, health insurance, employer reimbursements, scholarships, etc. However, remember that it is the recipient who gets them tax free.
• Make the most of deductions. The most important are usually mortgage interest, state taxes and donations to charities.
• 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 when possible.
• Consider deferring tax payments; this may be reasonable in many cases.
• Transfer income to other taxpayers, for example, gift high-value assets to children.

Aspects to determine your tax liability

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

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

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

tax jurisdiction. You are free to choose your tax jurisdiction. Use the benefits of low tax centers abroad as well as the beneficial features of tax regimes in high tax countries. Several jurisdictions welcome investments from non-residents in exchange for full tax and reporting exemption. Some countries favor particular types of activities that attract investment in specific industries.

Choosing between low-tax centers, seeking a favorable offshore jurisdiction for trade and professional services. dominican gold seychelles First, for financial holding companies and insurance business, consider BVI, Cyprus, Panamafor ship management and maritime operations – Cyprus, Dominica, Nevis or Panamafor licenses and franchises – Cyprus, Gibraltar, Panama, and so. It is very likely that you will find a suitable option for you among the existing offer. But keep in mind that some companies are not really mobile in terms of changing jurisdictions.

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

Double taxation

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

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

In addition to tax treaties, several developed countries have established special tax rules allowing the credit of foreign tax paid even without the corresponding tax treaty in force between the countries involved.

Double taxation may also have a place within the company’s income distribution processes. It can be taxed first as company profits and then as dividends to shareholders subject to withholding at the time of distribution. Check the related local legislation to find a possible remedy for this case.

Practical tips

• It is more beneficial for avoid tax resident status in the country of the highest profits trying to limit it to withholding taxes.
• Is better defer withdrawal of funds of business and repatriation of profits. On certain occasions, deferment is equivalent to tax exemption.
• Transfer of assets is more preferable as capital movement instead of the movement of income or earnings.
• When comparing the tax regimes of different jurisdictions, attention is paid to the process of formation of the tax base in addition to the tax rate figures.

The issues that you must resolve in the final stage of tax planning, such as the appropriate tax distribution of assets and profits, are not directly related to the calculation and settlement of taxes. However, the development of priorities in the accommodation of profits, the repatriation of capital and the investment policy provides additional tax benefits and a certain refund of taxes paid.