Tax planning is the general exercise of analysing a possible financial plan or a situation from the taxation perspective in the way that it’s the most beneficial for the business or individual. With efficient tax planning, businesses can ensure that all the elements of a financial plan work together with minimum tax liabilities. Typically, tax planning encompasses considerations including (but not limited to) the size of the income, the timing of it, the time when the purchases were made, and the kind of expenditures made; further, the chosen investments and picking the most appropriate retirement plan plays an essential role in ensuring which deductions may be applicable. With the help of proper tax planning from experienced taxation lawyers, it is easy to streamline one’s payments to receive significant returns over a given amount of time with the least risk.
The advantages of tax planning include minimising litigation, leveraging greater productivity, reducing tax liabilities and, in general, ensuring more excellent economic stability.
Typically tax planning can fall under any of the following categories:
- Purposive tax planning: When the tax planning is done with a specified objective in mind.
- Long range/ short range tax planning: When the tax planning is conducted at the beginning or the end of the fiscal year.
- Permissive tax planning: When the planning falls under the legal framework.
Please find below a non-exhaustive list of areas in tax planning:
- international taxes, including treaty issues, transfer pricing, investment structures, etc.; this area is especially relevant for corporate groups or even a singular corporate entity functioning internationally in more than one country,
- government and local tax planning
- wills, trusts, etc.
- Executive compensation
- taxation about corporate restricting, i.e. mergers, acquisitions, etc.
- business formation and choice of entity and the consequent tax implications
- tax-exempt organisations
- tax dispute resolution
- estate tax planning
- individual income tax planning
- tax-qualified plans, including pension plans, ESOPs, profit sharing etc.