5 tips to reduce your company’s tax burden
Five lawful habits that ease the tax burden: proper documents, knowing what the law allows, reviewing the legal form, meeting deadlines and planning from the start of the year.
Reducing the tax burden does not mean evading tax; it means not paying more than the law requires because of a missing document, an avoidable penalty or a decision taken without studying its effect. Note: tax rates, exemptions, thresholds and dates change from time to time, so no figures are given here; what applies to your activity should be confirmed with the office or the tax authority.
1. Support every expense with a proper document
A genuine expense that is not backed by an acceptable document may not be recognised when tax is calculated, so you pay tax on a profit you did not really make. Ask for an invoice in the name of the business for every transaction, check that the supplier’s details are correct, and keep proof of payment. With electronic invoices and receipts, documentation has become both easier and more important.
2. Know what the law allows for your activity
Legislation may provide special treatment for certain activities, sizes or areas, or allow particular costs to be deducted on conditions. These provisions change and their conditions differ, so it is not safe to rely on what you heard from someone else. Ask your accountant what really applies to your case and which documents are needed to benefit from it.
3. Review the legal form of the business
A sole proprietorship, a partnership and a capital company differ in how they are taxed, in their obligations and in liability. The form that suited you at the start may no longer be the best after growth or the arrival of partners. Reviewing this choice with your accountant and legal adviser before changing it spares you unplanned costs.
4. File your returns and pay on time
Penalties and late-payment charges are an extra burden with nothing in return. Keep the dates of all periodic and annual returns in one calendar, have your data ready well before the date, and do not forget the taxes withheld on dealings with others or from wages.
5. Plan from the start of the year, not at its end
Most decisions with a tax effect are taken during the year: the timing of an asset purchase, the wording of a contract, a pricing method, a profit distribution. Once the year is closed, all that remains is to record what happened. A short session with your accountant at the start of the year, and a review at each major decision, is worth more than trying to correct things when the return is being prepared.
What should be avoided?
Hiding income or inventing expenses or invoices is not tax planning; it is a violation that exposes the business to additional tax and penalties.
In short: a fair tax burden is the result of orderly books, proper documents and decisions studied in advance, which also gives you a calm file in any examination.
Note: this article is general accounting and tax information for awareness and is not professional advice on a specific case. Tax rates, thresholds and dates change, so confirm the rules currently in force with the office or the tax authority.
