Introduction:
In today’s world, when the expenses of most individuals surpass their income. Everyone wants to save money to ensure a good lifestyle and better savings for the future. For most people, the taxes are a major form of expense that takes away a lot of their income. Such people look for ways through which they can legally reduce their personal and also corporation taxes. A lot of the articles and guides you’re going to read online will have useless information. But, we care about you. We’re going to give you quality information through which you will become able to reduce your personal and corporation taxes legally, with ease.
So, read this article and you’ll find out about the most effective ways in which you can legally reduce your taxes!
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Countries With High Tax Rates:
There are a lot of countries that have a very high tax rate. When there’s a high tax rate, people are unable to save their income for a better lifestyle. But the point is that the tax rate that you choose is in your hands. You can either choose to have a tax free life or have a low tax rate. There are a lot of smart ways in which you can do this. Whether you want to reduce your business/corporation taxes or personal taxes, there is always an effective way to do so, in a legal manner. So, let’s discuss the details now.
This Won’t Lower Your Taxes:
The issue is that most people can’t differentiate between what is legal and what isn’t, in terms of lowering the tax rate. Before we get to the actual ways through which you can legally reduce your tax expenses, let’s talk about some concepts that are common. But won’t help you lower the taxes.
On the internet, you’ll see the strategies adopted by companies like Amazon, Starbucks, or Google for lowering their overall taxes. But the point is that the business that you own is not like the multinational companies that these are. You cannot use their methods on your business or personal tax process. That is not how your business conditions are. Therefore, you cannot apply such a complicated and complex plan to your business. The plan applied by Starbucks won’t work for you. So you need something that is specifically designed for your business and personal conditions.
Most “guides” will suggest you follow what the big companies. But you should never do it as it won’t be effective for you at all. Your plan has to be something completely unique as compared to all the other businesses out there, whether local or international. The plan that you make should be based on your system, not someone else’s.
Another wrong concept that most people promote is that if you open an offshore bank account, you won’t be required to pay taxes on the money that you hold in that specific account. This is absolutely not true. Having an offshore bank account might have other benefits like a higher interest rate, being able to hold foreign currency, and other things. But lowering your taxes isn’t one of them. Holding money overseas does not mean that it will not be taxed where you live. The jurisdiction where the income you earn is what matters the most. So, know that an offshore account won’t lower your taxes. Now let’s look at the things that actually will.
Lower Your Taxes:
So, if you are looking for ways to lower your taxes, you need to do it in a 100% legal manner. Anything else that you read about or are guided about; ignore it! There are two basic ways through which you are taxed. One is based on where your business operates and one is where you are located. Both seem very closely related and you can’t really differentiate between the two. But when you go offshore, things become very clear in terms of the difference. If you want to lower your business tax, you must lower your personal tax too.
We have made a quadrant which takes into account; four different aspects that will help you understand everything with ease.
- Personal taxes in the place that you’re leaving.
- Business taxes in the place you’re leaving.
- Personal taxes in the place you’re going to.
- Business taxes in the place you’re going to.
Each of these 4 different elements affects each other. So, you have to focus on all four of them otherwise you won’t have an effective tax lowering plan.
Personal Tax In The Place You Leave:
If you own a business, then you must have wondered about moving your business to a place where there are tax benefits while you continue to live where you are. Well, it isn’t really possible to do so. That is not how the offshore process for businesses works. If you are the resident of a country that has a high tax rate, then your business will also be considered as a tax paying resident there. So, even if you would’ve incorporated somewhere else, it won’t really matter. All that it will lead to will be a lot of paperwork for you and that’s it.
In order to enjoy the tax benefits, you will be required to personally move to some other country. So, if you are ready for it and you really want the tax benefits, then you need to move to some other place that will allow you to have the low tax benefits. It might be hard, but if it’s worth it to you, you’ll find a way to do it.
Business Tax In The Place You Leave:
You can easily move your personal life to some other place. But shifting your entire business is very complex and complicated. But all of it actually depends on whether or not you are a tax-paying resident in the place where your business is operating. And a lot of things also depend on the type of your business. Is it a sole proprietorship, partnership, or company? All of the things matter. You will need to talk to a tax expert in order to understand how things will work for you. Moving an entire business to a new location can be almost impossible for most people. But if saving the taxes is a need then you need to make the arrangements for shifting your business. Everything will require a lot of effort from you because none of this is easy in any way.
Personal Tax In The Place You’re Going To:
So, if you have decided to move to some other place, you need to choose either a low tax or a zero tax country to reap the benefits. Also, you can think about getting a tax residency if it suits you. While it is true that the 0% tax countries might feel the best for you but don’t forget to think about other low tax options too. You need to consider the lifestyle that you’re going to get to because you’ll be permanently living there. We also suggest that you consider moving to countries with a territorial tax system such as Singapore, Thailand, and Malaysia. So that as long as you’re there and your income is based somewhere else, you won’t have to pay the local taxes at all unless you conduct your business locally.
When you move to a new place, you’ll also find some complications in getting a proper resident status. You’ll need to focus on a lot of things before you can become a proper resident. Then become able to enjoy the tax benefits. So, before you make your decision, be sure to consider everything in detail.
Business Tax In The Place You’re Going To:
Moving your business to a new place is very hard. Secondly, moving to a new place and getting the tax benefits at once, is even harder. However, when you’re moving your business, make sure you choose a country with a low tax system. And just because a country has a good tax system, doesn’t mean you should shift there at once. You need to consider the personal lifestyle that each place offers as well if you want to have a good life.
Corporate Tax Systems & Offshore Businesses:
Before you think about shifting your business to a specific place just because you heard that it is good in terms of economic opportunities, make sure that you study their tax system in detail to understand how things work there and how you will benefit from them in the most effective manner. Generally, there are 4 different tax systems that you’ll commonly see. So, we are going to discuss the 4 most important tax systems that you most definitely need to know about.
- Countries With Low Tax.
You will see countries where the tax rates are very low, with rates being something around 12%. These rates aren’t too low. But you can shift your business to such places and become able to grow and expand your business with ease. There are many countries that have a low tax system such as Mauritius, Bulgaria, Cyprus, and Montenegro.
In these countries, you’ll be able to lower your tax expenses as their tax rates are very low as compared to other places.
- Deferred Tax Systems.
The countries that have a deferred tax system may or may not be low tax countries. In most cases they are not low tax countries. Countries like Estonia and Georgia have a deferred tax system for the offshore businesses while having a tax rate of around 14% to 20% which is very moderate. There are also places that have a low tax rate and also a deferred tax system, such as Macedonia.
But do you know what deferred tax actually is? It is a system in which a country will let you earn money and not pay any taxes until you take the money out to another place. As long as the money that the business earns stays within the company and is being invested in the company, you won’t be required to pay any taxes. This type of a system will help you keep more money within the business for growth and expansion.
However, if you have a business in which you need to flow the money around, then such a tax system won’t offer you any benefits at all. So, unless and until you are sure that you’ll mostly keep the money within your business, a deferred tax system won’t do you any benefits at all.
- Exemption System.
There are also tax exemption systems in which the businesses operating outside a country have a different tax procedure. The best example of this is Hong Kong. In Hong Kong, tax exemptions are offered to a lot of businesses that qualify the requirements and needs of such a system. So, you need to analyze your needs and your own requirements before you can make a decision about whether such a system of tax is going to benefit you in any manner or not.
- Zero Tax System.
There are also countries that offer a zero-tax system for offshore businesses. Places like the UAE, Belize, and many others will offer a system that is basically a 0% tax. That is very beneficial for businesses. These places will be beneficial for almost every business as they will be able to save a lot and grow and expand with ease. Also, when you consider the zero-tax countries as the best for you, make sure that you see whether their lifestyle will match your personal needs or not. Because you need to make sure that not only your professionalism but your personal life becomes better too.
Which System Is The Best For You?
Well, this is a question that really only you can answer yourself. Only you understand the needs and requirements of your business. Therefore, you need to analyze the different tax systems yourself. Also, check which one of them is the most suited for your business. Once you find out the best system for you, you can make preparations for shifting your business to such places that have the most benefits for your business.
Concluding Remarks:
So, as you can see, the process for lowering your personal and business taxes in a legal manner is not easy at all. You will need to consider so many elements before you can make a decision about what you need to do and what will work for you. The issue is that you need to consider both your personal and your business needs, as both are connected and dependent on one another in so many ways. So, if you focus on one and leave the other, it will create issues for you. In order to make a good decision for your business, you need to focus on the personal side and in order to make a good decision for your personal life; the business has to be considered too.
We gave you all the information that you need regarding the most effective methods that you can adopt for making things work for you in the best way. So, all you need to do is study each and every system in detail. Then match it with your overall requirements and needs. Only after doing this will you be able to make the right decision about how you want to approach the process of lowering your taxes.
Also, avoid following the wrong concepts and methods of lowering your taxes, explained by people who don’t know much about the topic. Always try to follow the relevant and trusted sources for making sure that you do everything in the most effective and efficient manner. We hope that this article was of some help to you. We also hope that you will be able to achieve success in lowering your taxes!