Tax consulting for global (international) or local businesses
Taxation is the price which civilized communities pay for the opportunity of remaining civilized." said Albert Bushnell Hart and was undoubtedly right.
Albert Bushnell Hart
Albert Bushnell Hart and was undoubtedly right.
Pay your taxes and sleep like a baby
Medium and large businesses pay taxes on net profit (small business is sometimes allowed a simplified tax regime, paying on turnover). To focus on scaling and set the financial model right, it’s necessary to streamline the company’s corporate structure. In first world countries, companies account for taxes in the business plan. Given the more than sufficient margin of stable IT companies, the very idea of dodging taxes or paying unofficial salaries is ridiculous to them.
The art of practicing law
The trick is not in avoiding taxes but in finding legal ways to pay less. The legislator established several tax systems, such as general or fixed tax. Aside from this, 200+ countries offer alternative tax rates and benefits. What sets IT business apart is that it’s not tied to a particular territory, unlike, say, a factory, mining enterprise or supermarket.
Medium and large companies can have their R&D departments based in one country and their operating company, which owns the IP and sells the product, in another.
Small companies are able to make use of local tax regimes that offer preferential income tax rates, within certain limits for turnover or income set by the state.
Dividends and BEPS
Businessmen used to "store" dividends in overseas holdings to avoid paying taxes on them, with the holdings managing these funds by investing in other businesses, buying movable and immovable property, etc.
New legislation has forced them to reconsider this strategy. Now, even if the money is not transferred to the account of the holding’s owner, the latter must still pay tax at the rate of distributed dividends. In other words, those who used to store money in holdings now have to pay up.
IT business sometimes gets its income as royalties rather than more standard types of revenue. It’s still revenue, just one paid by a client or user for the use of IP. This can get complicated when it comes to foreign customers. The bare minimum precautions here should be to make use of agreements, avoiding double taxation, to observe substance requirements and to use properly worded contracts.
Paperwork, laws and bureaucracy
Tax-related issues are difficult both at the practical level and the level of legal techniques. Tax forms, proper contracts, acts and invoices, inspections, bookkeeping, reports, legal precedents and the dynamics of changes in 2020 all suggest that it’s time to open your messenger and start a chat with Icon.Partners lawyers.