The 5 ways to save taxes in 2018 with a company

The year 2018 offers supreme advantages to save taxes with a company

A company that is already incorporated in your country of tax residence or abroad can achieve greater tax savings than an individual. The main characteristics of the companies is that the owner of the company is not responsible for the assets he has earned as an individual and has the ability to deduct more taxes. 

Taxes are an obligation that companies and natural persons have in their country of registration and residence. There are ways to save taxes legally but we have to be very cautious since any misinterpretation by our advisors or us could involve us in problems with tax agency. The objective of paying taxes is for the sustenance of public services that we use both natural and legal persons. 

We can classify the taxes of a country by tariffs, special rates and taxes. 

  1. The tariffs could be defined as the payments made to the administration to satisfy our needs.
  2. Special rates could be defined as the payments made by a group of people to the administration in order to satisfy the needs of several people.
  3. Taxes can be defined as the payment made by an individual or company to the administration to enjoy the public services generated by all taxpayers.

In countries where there is an obligation to pay taxes there are 2 types of payers. On the one hand there are individuals who do not know how to save taxes thinking that by doing that they would be committing a crime and on other hand there are individuals who are familiar with taxation planning enough and see the small legal holes in tax laws. 

The ways to save taxes with a company will depend on whether it is incorporated abroad or in the country where the beneficial owner is a resident. If the company is incorporated abroad, the 5 ways to save taxes will be the following: Opening a company abroad is a legal process and governments do not impose any kind of restriction when registering a company abroad, quite the contrary, the tax agencies are wishing that people and companies earn money outside their country of residence in order to pay more income taxes and have the governments better financed. 

  • The first way to save taxes is by opening a company in a country where the corporate tax are low, such as Cyprus, Bulgaria, Romania, Slovakia, Czech Republic, Malta, Ireland. Corporate taxes in these countries range between 9 and 12.5%. 
  • The second way to save corporate taxes would be to conduct a plan on the fiscal pressure of the country. There are countries where there is a greater tax burden than in others. When creating this fiscal plan we can ask our tax advisors advice abroad to indicate the degree of tax deductions that we can apply to our company. That is, the objective is to try to include most of the corporate deductible expenses in order to reduce the tax bill.
  • The third way to save taxes with a company would be to request in the country where the company has been registered information about grants. It is not uncommon for countries to use legal tactics in the form of subsidies with the aim of saving corporate taxes and having content to the investor. In many countries there are programs of 50% rebates on the tax of offshore companies during the first 2-3 years.
  • The fourth way to save taxes with a company would be to leave the benefits earned on the account of the company and not repatriate it to the country of residence in the form of dividends. The tax agencies determine if an individual pays or not taxes for the estate he has in his country of residence. If the owner of the company can justify that with the money he earns in his country of residence he can maintain the level of living that he has and there is no repatriation of covert money, the owner of the company will have no problems. The tax agencies do not require repatriation of the money of a company registered abroad but they are very attentive to the increase of unjustified patrimony.
  • The fifth way to save taxes with a company would be to move the tax residence of the final beneficiary to a country with a lower tax burden. In the European Union, a person is considered a tax resident in a country when it is more than 183 days. If the person lives more than 183 days in one country, they would be subject to another type of tax payment and tax burden.

The year 2018 will be an expensive year for companies. It is estimated that in countries such as France, Portugal, Germany, Italy, Austria and Spain corporate taxes tend to rise and tax deductions and non-deductible expenses are increasingly monitored. Therefore, seeking for a reduction in the lower tax burden will be the key to saving taxes.