Tax strategy is an enterprise response to taxes imposed by the government. The obvious purpose of the strategy is to seek to optimize tax burdens.
Tax strategies should be applied broadly, as taxation concerns almost every aspect of business activity, depending on organizational and legal form, the localization of business, to the sources of finance.
Organizational and legal form
First of all, it is imperative to choose the form of business activity between a form of sole trader or a company (e.g. limited liability partnership). This has an effect on tax reliefs granted to entrepreneurs and the amount of the tax burden.
Place of activity
We can distinguish two aspects here – domestic and international. The first relates to (for example) Special Economic Zones, which allow entities operating within them to benefit from tax reliefs. Notwithstanding the above, it should be noted that municipalities can independently regulate local taxes (e.g. property tax), which in various parts of the country can bring other benefits. The international aspect is the possibility of doing business in another country where the rate tax rates such as VAT, CIT and PIT are lower – the so-called “Tax havens” (e.g. Cyprus, Seychelles).
Type and object of business activity
It is a matter of great importance when it comes to application of the special forms of taxation – fixed amount tax or lump-sum tax – because they are designed only for specific activities (e.g. the creation of handicrafts).
Sources of funding
All costs of foreign capital are considered to be tax deductible expenses. Therefore, usually, the higher the share of foreign capital, the lower taxes. Examples: interests on the loan for start-ups, Venture Capital funds.
CGO Legal Law Firm offers legal analysis of investments and helps in choosing the right tax strategy.
Feel free to contact us, if you are interested in learning more details.