Tax optimisation is an important activity in the life of a company. This procedure obviously requires prior knowledge of certain financial laws. One thing is for sure, managers must work closely with accountants to achieve tax optimisation.
To meet the financial needs of a country, the state has introduced taxation. This procedure is therefore a kind of regulation that aims to collect taxes. Generally speaking, there are 4 types of taxation; income tax, corporate tax and value added tax is called state taxation. Any natural or legal person residing in the national territory is subject to state taxation. In other words, a person or company must pay taxes. With the money collected through taxation, the state can carry out public works.
Income tax and corporate tax
Every company is subject to taxes. But when is a company subject to income tax and when is it subject to corporation tax? The answer is easy; it depends on the legal form of the company.
Income tax is for:
– Non-commercial profits
– Sole Proprietorships
Corporate income tax applies to: Limited Liability Companies
– Limited Liability Companies
– Simplified joint stock company
– Single-Member Simplified Joint Stock Company
Family-owned companies can choose between income tax and corporation tax.
Tax cutting techniques
Every manager must optimise the taxation of his company. Indeed, taxation is perceived as a heavy burden for companies. It is therefore important to reduce it as much as possible. But how can this be done? To better understand these techniques, it is necessary to explain how to calculate a company’s income or corporate tax. These are calculated based on annual profit and turnover. High profit means high tax! Therefore, in order to reduce the company’s tax burden, these two parameters must be taken into account. To reduce the latter, you have to play on the expenses. However, in doing so, these costs must be in the company’s favour. Deducting expenses from the profit can considerably reduce the tax burden. Another way is to increase the remuneration of employees, for example. There are several other techniques to reduce the tax burden of a company, but the most important thing is to ensure that the expenses are deducted from the profit margins to the extent permitted by law.