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What is tax planning? What are the common methods?

TIME:2020-09-30 SOURCE:admin VIEWS:238 times

What is tax planning? What are the common methods?

Originated from the British Tax Commissioner v. Winster in 1935. Sir Tomlin, a member of the House of Lords, described tax planning in this way: Everyone has the right to arrange his own business. If certain arrangements made in accordance with the law can pay less tax, then he cannot be forced to pay more tax. After more than half a century of development, a standardized definition of tax planning has gradually formed. Within the scope permitted by law, through advance planning and arrangements for business, investment, and financial activities, as much as possible to obtain tax-saving economic benefits.

Tax planning is the behavior of a company that can meet relevant conditions to carry out reasonable financial planning.

What are the common ways of tax planning?

1. Use preferential tax policies to carry out tax planning

(1) Choose local preferential policies and meet some conditions according to the nature of your industry to achieve the purpose of slowing down. For example, a series of policies such as a 20% preferential tax rate for qualified small and low-profit enterprises, and a 10% reduction of the total income of enterprises using comprehensive resources;

(2) Observe the fiscal and taxation policies of the relevant industries in which you are engaged, select goods, and apply for relevant qualifications for tax saving. For example, the high-tech enterprises that need key support from the state are taxed at a reduced tax rate of 15%.

2. Reasonable use of corporate organizational forms for tax planning

Applicable to companies with a little economic strength, using subsidiaries and branch companies to split fiscal and taxation, thereby achieving cost savings. Subsidiaries have independent legal personality and can bear civil legal responsibilities and obligations. Branches do not have independence Legal person qualifications require the head office to assume legal responsibilities and obligations.

3. Use inventory valuation to carry out tax planning

Choose different inventory pricing methods. As the name implies, the goods are sold separately. The first ones are sold first, and the ones behind are the latest products. The purpose of this cargo diversion method is to reduce the pressure on funds and reduce the accumulation of inventory.

4. Use cost deduction standards to carry out tax planning

Expenses and expenses are a transmission factor of taxable income. Within the scope permitted by the tax law, expenses in the current period shall be listed as far as possible to reduce the income tax payable.

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