One of the most critical issues that concern individuals and companies is taxes, and why not they are deducted from their money and do not feel their return directly. Everyone is looking to reduce that tax to the maximum extent possible or dispose of it without falling under the law. One of the most important and best ways to reduce the tax is tax planning.

Corporate tax planning is not only the planning of the company’s financial position and lists. It is comprehensive, sequential, and analytical tax operations for all financial aspects according to tax efficiency and the achievement of the accounting treatment of taxes, which, by extension, require decisions to reduce taxable obligations.

Due to the initial complexity of the matter for some individuals or companies. They resort to dealing with the offices of chartered accountants, auditors, and tax services. Our office is one of the best, so we will dedicate this article to discussing tax planning and our tax services.

But at the beginning, let’s find out what tax planning is by the following definition

Tax planning concept

Procedures are followed by the tax person, whether an individual or a company, to reduce the amount of tax due to him during a specific period by following one of the tax planning and financial planning strategies that accurately analyze the financial situation.

Tax planning is different from tax evasion. Planning uses legal methods not to pay or reduce the tax value. Tax evasion uses illegal methods to evade payment altogether, making the company vulnerable to legal and criminal penalties and fines.

While tax avoidance is a person's search for legal ways and methods to reduce the tax price imposed on them without any tax planning. Thus, tax avoidance differs from tax planning. Tax avoidance resorts to after-tax determination and issuance. Planning can start from the first moment of its inception—your company or before filing a tax return

The importance of tax planning

  • Improve the value of tax payments and reduce the value of tax losses.
  • One of the most critical objectives achieved by tax planning is to avoid falling under tax liability and the provisions of tax laws.
  • Contributes significantly to the optimal use of company resources and non-taxable assets.
  • Provide sufficient liquidity to implement the company's investment plans.
  • One of the most important reasons for the company's healthy growth and economic stability.
  • Participates in making rational decisions that are in the interest of the company.
  • Provide tax plans and recommendations for their accurate implementation, which helps to make the company successful.

Types of tax planning

The types of tax planning vary according to the way they are planned

  • Planning according to time:

It is divided into long-term tax planning and short-term planning.

  • Consensual tax planning:

The tax plan is drawn up by the tax provisions that are recognized and applied within the country.

  • Plan according to the goal:

A tax plan is drawn up according to a specific goal. For example, a tax plan is sometimes developed to replace proven assets with other assets subject to a tax amnesty.

  • Internal planning and external planning:

Internal planning aims to determine the company's accounting policies, tax editing method, current tax payment methods, benefits, tax reduction methods, and others. External planning is carried out by determining the company's tax subject, activity, legal form, and judicial registration.

Tax Planning Characteristics

Integrated tax planning is based on several characteristics, including:

  • Tax planning is an ongoing and integrated process that includes all items registered in the tax return.
  • Planning to avoid paying the tax value if this is legally available, many items are deducted when determining the tax value by the Authority. Here, the tax financier can replace items that are liable with withheld items, such as replacing the tax return Personal finance financed through bank loans.
  • Exploit all tax exemptions available in tax law and related laws to reduce the financial value paid to the interest.
  • Tax benefit will be reduced Certainly if, from the beginning of its establishment, the company has recognized all the costs and expenses committed to it, that is why we recommend developing companies pay attention to doing tax planning from the beginning, which is provided by the best tax planning office in the Middle East, ECPA.
  • Prove all precautions, and deductions made during the tax period.
  • Suitability of the legal form of a company is one of the most important characteristics to pay attention to when planning
  • Reducing the value of the tax base is the first goal of tax planning and is based on the use of renewable accounting and legal methods that are compatible with the tax law and its new developments

Tax planning strategies:

Achieving good tax planning relies heavily on qualified advisors who can perform financial and tax analyses and constantly inform tax laws amended every year. The success of the tax advisor also depends heavily on the tax strategy he follows and its suitability for the company or individual

What are corporate tax planning strategies?

  • Additional expenses:

The company's taxable income is reduced by additional operating expenses, such as purchasing new equipment. Still, you should pay attention to the fact that the equipment is required within the company and will generate income from its use.

  • Deferral of tax payment:

Companies want to defer tax payment for a later fiscal period to use those funds to invest during the period without interest from the tax interest.

  • Trade-off between:

Buying or renting assets, where the amount paid for the purchase of new equipment, when renting, it is determined which is better and reduces the calculation of tax.

Is the policy of selling for time or selling cash followed؟

  • Total employee salaries and board members' bonuses and allowances are recorded.
  • Recording the losses suffered by the company during previous years:

It will affect future years as certified losses.

  • Inventory management:

Using appropriate methods to manage inventory is included in tax savings.

  • Support:

Of course, the number of individuals you support from your family members affects the tax value negatively—the more family members, the lower the tax value and vice versa.

What are individual tax planning strategies?

  • Deduction in salaries and employment costs:

Recording the deductions you are exposed to, or the costs you have incurred for employment helps reduce the tax.

  • Exploiting employment benefits:

Some individual companies offer their employees additional employment benefits such as medical and recreational benefits. Therefore, part of the salary is deducted. Here, you can use this withholding to your advantage, as the IRS considers all deductions, discounts, and additional benefits.

  • Unsteady income or timing:

Individuals who are not employed in government bodies whose individual income is linked to the time of purchasing the service or product they have. Therefore, income time changes and is non-fixed, making the tax not fixed and changing according to the value of income and specific professions associated with a particular time, such as tourism professions

  • Retirement planning:

Individual entrepreneurs or companies always create individual accounts to live from after retirement. An amount of income is calculated for this account, and this amount is considered one of the items affecting the tax.

Tax Planning

A simplified video illustrates the role of effective tax planning in reducing the tax burden on companies by exploiting legal loopholes without violating the law. 

Tax Haven

One of the most common tax strategies is tax shelters that help reduce the tax or if the tax on the company can be abolished. However, with the value of taxes rising and companies looking for a quick and hefty profit at the same time, companies have turned to alternative solutions, including tax shelters, which are Also known as tax committees, foreign countries other than your own country impose a meager tax and sometimes not impose a final tax.

These countries include companies from other countries into their tax scope, so they do not require them to be present within the country but require the opening of bank accounts and the existence of investment means to increase capital and develop their economy. Although this method benefits tax shelter countries, it causes a great deal of damage to the global economy and the economy of corporate home countries.

Why not the proportion of wealth that follows tax shelters and is not taxed over the past year has reached more than $30 trillion. The most famous countries recognized as tax shelters are Hong Kong, Panama, Monaco, Bahamas, Belize, Cook Islands, Jersey, Cayman, etc

Characteristics of tax shelters

The Organization for Economic Cooperation and Development (OECD) had determined that tax shelters are any country to which the following characteristics apply:

  • Do not impose a tax ultimately or impose it at a meager price.
  • The State refused to send tax returns on companies and a device for exchanging tax information with other countries.
  • The State does not authorize any banking or commercial information related to companies and is not transparent about the tax asylum's administrative and legislative procedures and laws.
  • The State allows companies to exist outside the borders of the State physically and does not require the company to have the company's headquarters within its borders.

Types of tax shelters

When following a tax shelter strategy as one of the tax planning strategies, consideration must be taken of selecting an appropriate country from one of the three tax shelters groups:

  • The first group: includes countries that do not impose any tax, called "Zero Havens." The number of countries in this group is minimal compared to other types, and the company remains subject to its state tax.
  • The second group: includes countries that impose taxes but at a low value and are divided into three levels of countries:

Countries with a tax of not more than 10%: such as Montenegro.

Countries that impose reduced alternative taxes: such as the Bahamas.

Countries that grant tax exemptions: such as the Virgin Islands.

  • The third group: These countries grant benefits to some companies that engage in a specific activity, including the State of Panama

International tax planning strategies

Transferring company profits: 

The tax mentioned above shelters are intended to transfer company profits from high-tax countries to low tax countries.

Transfer price: 

This strategy concerns companies with branches in different countries worldwide. The transfer rate of financial values of transactions, costs, financing, services, etc., is calculated. Then, the tax is reduced based on the monetary value of the transfer rate.

Financing through bank loans:

 This strategy is based on obtaining a loan from a highly taxed country and thus reducing taxable profit.

Legislative tools:

 One of the essential strategies for international tax planning, where companies exploit the contradiction of legislation within countries. Some countries consider bonds debt items, and some consider them as contributing items.

Corporate forms:

 Some forms of companies with external branches, such as holding companies, are non-taxable, and the company's establishment is chosen within the limits of one of the countries that consider dividend distribution as a tax-exempt item

Tax planning characteristics of multinational companies:

  • These companies are established to benefit from the advantages of tax legislation in different countries. This is because the company transfers its profits within countries with insufficient or low taxes, thereby reducing the value of its profits against the parent country of the high-tax company.
  • Tax planning for multinational companies is complicated due to the diversity of tax returns, legal forms, and tax laws for more than one country. This requires an international accounting office capable of dealing with all international laws, such as the Office of Egyptian Chartered Accountants.
  • Multinational companies have branches within one or more tax shelters countries.
  • Obtain all the benefits provided by double taxation laws, which require the company to pay the tax value only once, either to the parent state or a country of tax shelters.
  • These companies make many transactions between the company's headquarters and branches or between branches to reduce the tax value on them, including borrowing and development expenses.
  • International tax planning, which aims to reduce tax according to all countries within which the company has branches, is considered difficult at first and needs knowledge and experience.

Local tax planning

Tax planning is highly dependent on the skill and familiarity of the scheme with all international and local tax strategies and laws. For example, the Egyptian tax law relies heavily on Law No. 91 of 2005. Of course, all this law has implications and effects on other laws.

Here, we mean that understanding the tax scheme of all these laws will help him obtain a clear and comprehensive vision that enables him to make correct and successful decisions that comply with tax laws and provisions without causing any problems or judicial irregularities or using tax evasion as a means.

For example, when drawing the tax planning for a private company and preparing a form 2 insurance, we find that the insurance authority determines that the minimum insurance limit is 1400 EGP per month, but if the employee's salary is 2400. You deduct this amount; the employee gets 1000 EGP, although you will not fall under penalty. 

The Insurance Law, however, violates the decision of the Council of Ministers, which determined that the minimum salary in private companies is 2400. Thus, all the ramifications and branches of tax laws must be recognized.

Local and international tax planning needs excellent experience and knowledge of all the latest tax regulations and laws. Therefore, I advise you to deal with a large and well-known accounting office in this field that enjoys a good reputation among clients, which is strongly available in ECPA office

Tax advice

Tax planning needs a lot of experience, skill, and science to be implemented and achieve its desired goals. Therefore, individuals or companies resort to an accounting office or financial advisor to help him organize their company's affairs and reduce the tax charged to it, with the presence of many good accounting advisors... The name of the ECPA office is shone. 

The office provides all financial, tax, accounting, and legal advice. We have an expert and integrated team with chartered accountants, auditors, and substantial tax services, who are fully and constantly familiar with the latest legal developments and tax amendments.

Experts in tax planning are ready to receive and answer your questions at any time—many years of experience. The office also provides online tax advice. We also offer the first consultation free of charge. So book your seat with us now

What will the ECPA Office offer you?

  • We provide all tax improvement and planning services to individual and private companies and help the client rationalize the tax value by the provisions and developments of tax law related to it.
  • Integrated analysis of the company's financial situation following tax efficiency standards.
  • Fully aware of the latest technological and electronic tax methods and the latest developments in tax law.
  • We can help you avoid tax with the highest quality and use the best legal methods.
  • We ensure that you reduce tax costs to a minimum and legal and legitimate ways.
  • Drawing up a long-term tax plan for your company from the beginning of its birth can spare you to pay a lot of future taxes.
  • Helpful and internal technical expertise in the company to ensure the application of the tax plan.
  • Significant expertise capable of optimizing the tax savings available.
  • Our team provides accurate tax recommendations and accurate and proven accounting strategies to apply them successfully.
  • In addition, our team is available 24 hours to provide technical support and tax advice.

The ECPA Office is one of Egypt's best legal accounting offices in the Middle East. Its constant goal is to succeed clients and reduce their costs to the maximum extent possible. We always strive to provide the most critical tax planning and the best accounting, legal, and tax services

فريقنا - تامر محمد

Tax Planning Partner