Tax Planning is something that bothers a lot of people.
The legislation is complex, there are a number of pitfalls and it costs the entrepreneur a lot. This is in relation to the taxes that normally represent 1/3 of the revenues, or in choosing an appropriate support team.
But not doing and not facing these challenges is worse, you can lose sales due to the lack of competitiveness and still be paying more taxes than you should.
If this is your cause, and you need information, follow us on this journey by reading this post…
1- What is Tax Planning
If, on the one hand, the tax burden is very high, on the other, there are legal decisions and choices that will impact the way of paying taxes and the amounts collected.
We are allowed this possibility, but for that we need to analyze and make some decisions that will impact the operation of a company. Hence the name Tax Planning . There are several “ties” (in a good way) in the legislation and a wrong decision can impact your entire business.
Tax avoidance is just that: the act of enabling a lower tax burden for the company through lawful acts based on legislation.
But as not everything is a paradise, there is also Tax Evasion. Evasion is the lowest tax burden through unlawful acts. And the tip I give about it is: Stay away!
And to avoid it, nothing better than knowing what it is about. The main known forms of evasion are:
- Omission of information;
- Falsification and alteration of documents;
- Fail to issue documents and obligations.
To reinforce the tip, stay away from solutions like these. The IRS has increasingly modern means to identify and punish such acts and you and your company can get complicated.
Keep reading to learn about the importance of tax planning, main characteristics, objectives, steps to realization and professionals who can help. Check out!
2- What are the characteristics of taxes
It is not possible to talk about Tax Planning without first conceptualizing taxes well and understanding their basic characteristics.
Taxes are obligations to pay, created by law, which impose on individuals the duty to surrender part of their income and assets. These obligations are determined and occur when an event or transaction occurs that is called a taxable event.
Its objective is to fund the Government and we agree, it is increasingly difficult to do this, lol. There is another interesting definition in the words of John Garland Pollard, which is worth sharing with you:
“Tax is the art of peeling the goose by making it scream as little as possible and get the most feathers.”
There are some characteristics, or rather, some ways of classifying taxes:
- Regarding the incidence: In direct and indirect taxes.
- Regarding the calculation method: Fixed, proportional or additional.
- By relativity: In regressive, progressive or neutral.
- Considering the characteristic: In Extrafiscal and Parafiscal.
Another point that strongly impacts the amount to be paid is its calculation basis. Normally a tax is determined by a percentage ratio on a calculation basis. Understanding how the basis is changed is essential to good planning.
Examples of the calculation basis include gross revenue, assumed profit, calculated profit, purchase value and payroll.
Finally, it is important to understand who is the taxpayer or responsible for the obligation. This is because, in certain taxes, the legislation determines the responsibility for paying taxes generated by operations initiated in other establishments. We need to be aware of that.
We recommend for you: Do you know how to make the annual billing statement for your microenterprise?
Having said all that, and in a nutshell, let’s move on …
3- What is the importance of tax planning
If you don’t believe in the importance of tax planning, it’s time to prove to you that yes, it is very important. Let’s go to the main elements that prove this importance:
Share in company expenses
This point is indisputable, 9 out of 10 Brazilians think they pay too much tax. This is true, in the company they represent about 1/3 of the revenues. Reducing any value here translates into better competitiveness and certainly greater profitability.
An area to manage
Many companies are attentive to Tax Planning. As the expense is representative of the total, this has become an area within companies, it is as essential as Marketing or Sales and must be viewed strategically.
Need to reduce spending
This is a constant in the lives of companies and there comes a time when there is nowhere to reduce without jeopardizing the quality of the product or the service provided. Well, if the company didn’t attack the taxes, a definite opportunity may be being left behind.
Avoid unnecessary payments
There is no denying it, there are some taxes that are charged and that are not mandatory in certain situations. Mindful of this when planning it is possible to find out if there are any in your company.
Allows cash flow control
As there are choices in the form of payment, do you imagine that you can help in the company’s cash flow , choosing a form that you pay after receiving a sale, sensational isn’t it?
Obligation to monitor the financial situation
Doing Tax Planning is a way of taking care of the company. If you like your industry and your activity, do the best for your survival and profitability.
Can be performed by any company
There is no restriction, any company can choose to plan and choose the best way to pay its taxes.
My list was longer, more shortened and reduced, because if I have not been able to convince you so far, it will not be with more arguments that I will get.
4- What are the objectives to be achieved
As we are going in parts, let’s talk about the basic objectives of a good Tax Planning.
a) Avoid the levy of a tax
The best thing about planning is when you avoid paying a tax. In other words, you prevent the taxable event and there is nothing to talk about a tax obligation.
There are several choices that can avoid a tax, such as where a particular transaction is made from or with whom (type of company) the transaction is made.
b) Reduce collection amounts
It is inevitable to have to pay taxes. The good thing is that the Planning choices can lead your company to a situation in which these amounts are reduced, either with a reduction in the rate or when changing the base. This is the most common form of planning.
c) Delay a tax obligation
If you have not been able to rule out the incidence, or have not yet reduced the payment amounts, it is possible to work with the possibility of delaying the obligation. Have you heard of the choice between the cash or competence method? This is one of the ways.
By making the right choice you preserve the company’s cash and avoid some situations where payment is made to the government, even before receiving for the commercial transaction.
What are the ways to achieve tax objectives
You thought you would just say “choose the tax framework”, don’t you?
We can’t stop talking about it, but remember, this is a complete article, so I will tell you everything, everything, everything, even for you.
Well, let’s go…
Extrafiscalities and Tax Incentives
We cannot forget that one of the Government’s roles is to encourage productive activity. It does this, and the main way is to grant tax incentives.
These incentives should be viewed with reservations, because the same hand that gives, draws, but we cannot overlook some good opportunities.
It is necessary to be aware, there are some forms of incentive, such as;
- Equally encourage all companies in a given region.
- Encourage any sector of the economy that needs to be helped or that is strategic to the government’s objectives.
- Encourage some targeted investment, such as a productive investment, or even a cultural investment under the Rouanet Law.
Okay, now, let’s talk about tax frameworks.
Well, this is an annual decision, which changes a series of questions about how to calculate and pay taxes.
This choice also influences the ancillary obligations of companies. Meeting these obligations generates personnel, systems and processes costs and should not be ignored.
The available tax frameworks are: Individual Microentrepreneur, Simples Nacional, Presumed Profit and Real Profit.
We have an article that explores the differences between them, I suggest reading: What is the difference between Simples Nacional, Profit Presumido and Profit Real?
Changes in the way the company operates
As we said earlier, there must be an action for the incidence of taxes. This is the Fact Generator.
Often, by changing how we do business and company operations, some taxes can be reduced or eliminated.
Examples of this :
Modifying the way of consuming, how to choose a supplier that has some characteristic or a locality.
This is mainly due to obtaining tax credits, changes in tax liability and the incidence itself.
Failing to consume a particular item or exchanging for another that brings a tax advantage.
Changing the way of making some expenses or investments, such as choosing a specific location or modifying essential characteristics.
Another widely used way is to carry out a corporate reorganization, dividing the company into operations or even joining.
This brings results, as it is possible to choose according to the characteristics of each business, and thus maximize the tax result.
An example is an Industry that also provides some service, normally the industries have a low profit and high expense with inputs, making sense to fit in the Real Profit, but this may not be the best for the Service operation that would be better in the Presumed Profit separating the operations it is possible to choose the best one for each type of operation.
Defining the correct economic activity
Here we have seen many mistakes happen. As some taxes are generated based on the company’s activity, failure to define the correct activity can result in errors in the taxes generated.
It is worth reading an article we wrote about choosing CNAE: CNAE: If you don’t define your company’s activity correctly you will hate yourself later .
6- Stages of Tax Planning
Phew, we’re finally arriving, don’t we… pay attention to the steps.
Here is a suggestion because there are other ways to organize a Planning. But here’s the tip!
Gather an interdisciplinary group
Do not try to do the planning yourself, and also do not call only tax lawyers and accountants.
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It is necessary to do with an interdisciplinary group, which has people who understand tax, incidence, etc. But it is necessary to have people who understand the business and the operation, buying and selling in the company.
Set a schedule of steps
You have already chosen people, now it is time to set a schedule with the definition of steps and responsibilities.
This is not just pro-forma, if you do not control the schedule you risk not doing it or doing it wrong.
Collect information from the main calculation bases
I will bring you a list, but feel free to supplement according to the company’s business or characteristics. The topics below are only the main ones:
- Billing: Total revenue, geographic distribution of revenue and location of service provision.
- Purchases: separated by purchases within the State, Interstate and Imported.
- Services Taken by the company.
- Operational expenses
- Profit margins by economic activity
- Payroll Expenses
- Investment and its sources of funds
- Corporate Structure
Analysis and simulation of scenarios
With the information in hand, it is necessary to analyze the current situation of the company, project the future information and simulate it.
Simulate all possible tax situations of the company, paying attention to the points that interfere in the operation.
For example, assess whether changing the tax environment will impact how the customer buys. Also, if you buy inputs from elsewhere, freight expenses will increase.
The reality is dynamic, so it is important to consider all variations in the simulation.
The main points that the simulation should consider are:
- Revenue: The changes and changes had an impact on the market in which it operates and on the consumer’s purchasing profile.
- Profitability: There is variation in operating items with the change in taxes that increase or reduce profitability.
- Purchases: The changes caused changes in tax credits or in situations of Tax Substitution or Differential Rates.
- Labor: What will be the impacts on human resources.
- Operating Expenses: In order to achieve a certain result, there will be a change expense, of what volume?
- Assumptions: Did the assumptions used lead us to any risk of being sued or having a dubious interpretation?
7- Which professionals can help
We talked a little about the team in the planning stages, now I want to explore this aspect a little more.
You should consider all possible help welcome, for this you should consider:
- Internal team: Have strategic people in this study. The internal team knows the operation and the main impacts like nobody else.
- Accounting Office: Your accountant is an essential part of all of this. Assess only if he has the knowledge to support your company.
- Consultancy: Assess the need to hire a consultant, or analyze whether your accountant “does the job”.
- A conciliator: Someone who is exempt and trustworthy who can act as a conciliating agent in more tense moments.
This article had some objectives, to be complete, at the same time direct and lean, besides trying to be pleasant to read a topic that seems very extensive, complex and mainly “boring” in the opinion of some people.
I don’t know if I managed to achieve my goals, I hope so, anyway if you have any suggestions or considerations feel free to use the comments field below. Now if you have a company and need assistance, count on our professionals, we are available to serve you and your company well.