Like death, taxes are one of the things in life we can be absolutely certain of. Successful businesses, especially those organisations with high profit margins, are the businesses that carry the most weight and seem to be ‘punished’ the most for their success in the form of money paid to the government. But it’s not that taxes are evil, mind you – they are a necessity, after all – but smart business find ways to plan their tax contributions and avoid getting hit too hard. Here, then, are some essential issues every smart business needs to know regarding proper corporate tax planning.

Having a plan

Tallying up the total profit at the end of the year and having the government take its due cut is not a plan – that’s simply going with the flow. Having a plan means taking a good, hard look at profit projections and understanding that certain profits can be delayed whilst certain costs can be accelerated. This doesn’t affect the overall profit margin of your company, but does allow your company to pay less tax at the end of the year whilst reinvesting more into future earnings. Having a plan requires a good understanding of the law, and know-how of financial management. These are just some basic practices that can make a big difference.

Delaying income

At the end of the fiscal year, all profit is tallied and the percentage of due taxes is calculated. If there is some way a company can delay receiving the income projected for the last month of the fiscal year, and collect it in the first month of the next fiscal year – only one month’s delay – the income (and profit) is written down as next year’s profit; meaning that for this year, no taxes have to be paid on it. There are several ways of doing this; your company can push sales forward, you can work on consignments, or you can even change the dates of your year end. A little knowledge can go a long way indeed.

Forwarding costs

Costs that are scheduled for the next fiscal year can be paid this year. This has several advantages: some costs will receive discounts, and the cost total for this year will be higher (thus reducing profit for this year on paper and equally reducing tax payments). Pension fund contributions can be made a month earlier, advertising costs can be paid in advance, maintenance expenses can be disbursed prematurely, and specific provisions for bad debts can be established. At the end of the day, it all adds up.

Proper corporate tax planning can take many forms. Investments in green technology, using trade losses to one’s advantage, taking advantage of special circumstances regarding real estate – there are a good number of ways in which the law allows you to minimise your due share. Really, the rules and regulations are there for those who know how to deal with – and take advantage of – them.

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