Business

Here’s why corporate tax planning matters so much to businesses

It is common knowledge that it is an obligation for all corporations to pay taxes. Here’s why corporate tax planning Canada matters so much to businesses. It is actually true that businesses need to take several factors into consideration while deciding their overall tax liability. Let’s have a look at some of the most common factors that are often used to determine a business’ tax bill.

  • LOCATION: – It is common knowledge that tax rates actually tend to differ a lot among physical locations. There are some countries which are considered to be tax havens and it is mainly because businesses in such havens happen to be subject to very minimal taxation and it is always the large corporations that usually try to seek out such large tax havens. For example, one of the biggest companies in the world, Apple recently decide to change its tax havens after its usual tax haven (Ireland) made some changes to its tax laws due to things like international pressure. Apple switched its tax haven to the Island of Jersey and until recently it had its tax haven in places like Luxembourg and Starbucks in Holland.
  • Business Structure: – The taxes that are paid by an organization actually tend to vary a lot and it usually depends on how the organization in question has been structured. Organizations which happen to be non-profit are never really subject to any sorts of tax liabilities but on the other hand there are some for-profit organizations that happen to be taxed. One of the most important examples of a for-profit business structure would be the several Canadian controlled private organizations. 
  • Various Tax Credits :- Tax credits happen to be something that are often used by provinces or countries and such tax credits actually prove to be very beneficial in lowering the overall tax bill of an organization. There happen to be several tax credits that are issued by the Canadian government and they include the likes of qualified property tax credit, investment tax credit and apprenticeship tax credit. 

Corporate tax planning Canada is actually the development and implementation of all strategies that actually results in much lower tax liabilities in different organizations. The complexity of tax laws from one region to another means that this often ends up being a very lengthy and very complicated process. Often companies hire bona-fide experts in corporate tax to develop and then implement different corporate tax plans. 

Corporate tax planning Canada, if executed well can actually offer a ton of benefits to different organizations. Let’s have a look at some of the top benefits of meticulous corporate tax planning Canada!

  • Much lower tax rate: – Organizations have the power and ability to easily lower their effective tax rate by using measures that might not be common advertised or even known.
  • Taxable income reduced: – There are some other businesses that can easily implement various measures too reduce the amount of income that can actually get taxed, with or without changes in the existing tax rates.
  • Flexibilities in paying taxes: – The organizations involved can easily time the payment of their various taxes to easily minimize their financial impact.
  • Tax Credit: – Tax planning enables different organizations to easily take advantages of various tax credits that might have been favorable to different businesses. 

There actually happen to be several types of corporate tax planning Canada. The kind of tax plan that a business actually ends up choosing will usually depend on an organization’s unique needs as well as on its goals. There are various types of corporate tax planning Canada. Short-range tax planning is done on an annual basis when the business has to meet specific yearly goals. Long-range corporate tax planning Canada actually takes place over a much longer period for the purpose of meeting specific goals as well as objectives. Permissive tax planning actually happens when tax plans actually get made using different provisions that are mentioned within the law. Then we come to purposive tax planning and this is where plans are actually made to maximize all the different returns to an organization. There are some businesses who resort to misleading various laws by using this method.

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