Tax planning can be defined as a set of patterns being oriented or focused on optimizing the fiscal or tax burden. Thus, it can be used to reduce or eliminate it, as well as to obtain different tax benefits.
In this sense, such planning becomes a useful tool for the company in terms of its management, i.e., in relation to make decision to optimize its resources.
What is the purpose of tax planning?
According to the quoted above, Tax Planning’s purpose is the tax contingencies removing, to increase a company’s profits or reduce tax payments, all through the use of the respective legal mechanisms allowed, without becoming a simulation or fraud of the tax laws. Why is Tax Planning important? Its strategies are often to help companies achieve their financial and business objectives. That is where the importance of these lies, by reducing tax levels, allowing greater control of these, reducing potential penalties, and maximizing tax relief and/or tax credits. Thus, the company will achieve a higher cash flow, which will allow it to face other requirements or invest this tax savings again.
This is even more relevant in the context of a pandemic, as companies are focused on optimizing their costs to have greater liquidity.
Tax planning enables efficient management of tax savings and sets a reasonable level of taxation for a company.
How is this objective reached?
Tax planning will depend on each type of company and its particularities, so there is no single model to be followed by companies.
However, it is essential to have a specialist who knows the tax regulations in their full extension to have a broad overview of all the legal avenues that the company may have.
Likewise, an exhaustive review of the areas being relevant to the company should be carried out, which are usually the transactions and finance areas, as well as knowing what the main business or activity is.
The aforementioned leads to better results when planning tax strategies within the company.