International tax planning and optimization

Law &Trust International offers services in creating and implementing tax strategies using legal methods to reduce the tax burden, on direct and indirect taxes, both in European, Asian, offshore and other countries where clients conduct or plan to conduct their business.
We offer comprehensive tax planning or selective optimization of individual business processes, taking into account and minimizing legal, tax and political risks for clients.

What is tax planning and optimization?

Optimization and tax planning are closely related. To reduce mandatory payments, that is, to optimize tax deductions, it is necessary to properly organize production processes and financial management of the company.
In the legislation of most countries, tax planning includes the actions of taxpayers in accordance with the laws of their country, aimed at legally reducing the tax burden of the company. Tax evasion, on the contrary, means the deliberate failure to fulfill tax obligations. International tax planning is carried out by various methods, using various instruments, such as foreign firms, partnerships and other structures. It also involves choosing a suitable jurisdiction, legal form of organization, organizational structure, contracting schemes, profit distribution methods, etc.
A certain method of reducing tax payments is called a tax structure. It includes a description of business transactions that allow using a preferential tax regime and saving on taxes paid. The taxpayer is given the freedom to choose the organizational structure of the business and the tax system. He also has the right to independently determine suppliers and partners and agree on the terms of interaction with them.

Objectives of International Tax Planning

Key tasks of international tax planning:

Expanding the range of methods and strategies for optimizing a company's tax liabilities.
Effective organization of business processes in the international arena.
Placement of assets and financial resources in optimal jurisdictions in terms of requirements.
Ensuring a high level of confidentiality.

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Optimization of foreign assets

Tax minimization is often confused with optimization, and vice versa. It is important to note that the term "tax optimization" covers much more than just minimization and includes taxpayer actions aimed at improving the financial result, including reducing tax liabilities. Experts highlight the following tax optimization tasks:

Development and implementation of optimal tax policy
Determination of the most appropriate methods of calculating taxes, the terms of their payment and the conditions for forming the tax base for all types of taxes
Development and implementation of measures aimed at improving the company's tax solvency

Tax optimization stages

The tax optimization process includes the following stages:

Creation of a commercial structure
Selecting the optimal location for registering a company and its branches, taking into account the local tax regime
Selection of the organizational and legal form of a legal entity
Analysis, formation and implementation of the company's tax policy taking into account local tax incentives
Analysis of the company's planned activities and transactions
Development of business contracts and other company documentation
Selecting a method for placing the company's assets and a method for generating profit
Planning and assessment of tax risks of the company
Monitoring the actions of regulatory authorities for compliance with tax legislation

Types of tax optimization

Tax optimization is part of a company's tax planning and an integral part of its financial and economic activities. Types of tax optimization include:

Optimization by types of taxes
Optimization depending on the area of financial and economic activity
Optimization depending on the taxpayer category
Main tools for tax optimization:
Cost management
Conclusion of special agreements
Use of tax benefits and exemptions within the framework of current legislation
Replacement or division of relations
Tax payment deferral
Direct reduction of the tax base
Registration of a company in a foreign jurisdiction
Legal reduction of the amount of taxes paid and tax deductions

How to reduce taxes?

Reducing the tax burden is a legal reduction in the taxpayer's tax obligations within the current legislation. The main methods of reducing the tax burden include: choosing the type of agreement, using special tax regimes, accounting policy, applying for tax benefits, the right to a refund (offset) or compensation of tax from the budget, timely payment of taxes (control of deadlines), deferral of tax payment, separation of relationships.
Tax optimization plays a key role in the activities of many transnational companies today. One of the popular methods is to register a business in countries with favorable tax conditions. These jurisdictions can be classified as follows:

Classic offshore zones (off-shores): Provide complete tax exemption, in exchange for a fixed annual fee. Companies here, as a rule, do not conduct active domestic activities and are exempt from filing financial reports. Examples: British Virgin Islands, Seychelles, Bahamas, Belize, Nevis, Panama, Isle of Man, Marshall Islands.
Low tax zones and territorial tax jurisdictions: Tax only income earned within the country. Filing of financial statements is mandatory in these zones, but the level of taxation remains low. It is possible to use agreements to avoid double taxation. Examples: Cyprus, Hong Kong, Gibraltar, Luxembourg, Liechtenstein.
.Jurisdictions with normal or high tax levels: These jurisdictions strictly adhere to accounting requirements, reporting requirements and maximum transparency. Choosing such countries helps to improve the company's reputation and gain access to international financial markets. Despite the high rates, tax benefits are possible. Examples: UK, Switzerland, USA, Netherlands, Malta and others.

These classifications help companies choose the most suitable jurisdictions to optimize their tax burden.

Double taxation

There are two types of double taxation - legal and economic. The first occurs when the object of taxation is repeatedly subject to different types of taxes.
Economic double taxation occurs when the same income or property is subject to taxation in different countries. In turn, the problem of legal double taxation reaches the international level.
The reasons for the occurrence of double taxation are varied: dual residence, taxation of the same income in different jurisdictions in accordance with current tax legislation, recognition of the same income as a source in several jurisdictions at once.
As a result of double taxation, the total tax burden exceeds the amount of tax calculated on transactions.
Existing international tax treaties regulating the process of eliminating double taxation are represented by two main models: the model of the Organization for Economic Cooperation and Development (OECD) and the UN model.

Our services include:

Development of ownership and management structure of property, including foreign and local companies (international holdings)
Consulting on international taxation
Support of international transactions
Due Diligence (multilateral verification) of international projects and non-resident companies
Consultations on legal movement of funds and goods
Development of financing schemes, payment of dividends and license payments (royalties)
Development of a strategy and structure for investment in the country and asset protection
Consulting on privacy issues
Assistance in the creation of investment and financial structures
Preparation of legal opinions and analytical reports on corporate and tax legislation of foreign countries
Consultations on the application of agreements on the avoidance of double taxation, on the exchange of information and other intergovernmental agreements
etc.