In the case of inconsistency in the tax burden borne by related companies A and B, if the tax rate borne by company B is higher than that borne by company A, company B, which is related, may, by means of some kind of covenant, increase the profits of company A and reduce the profits of company B, so as to minimize the tax burden borne by them * * * together as well as that borne by each of them. In the case of inconsistent tax rates between companies within a company, transfer pricing is generally used to avoid tax by shifting major profits to a company with a lower tax rate.
If the full use of international tax havens, special economic zones and tax incentives, through the transfer pricing method, the high-tax zone of the company's operating income by way of lowering the sales price of the company into the low-tax zone of the company, the effect of tax avoidance is more obvious, the current multinational corporations to avoid tax mainly take this clock. For example, many joint ventures in China use the characteristics of Hong Kong's low income tax to set up subsidiaries in Hong Kong, and then sell the goods to the subsidiaries in Hong Kong at a low price, so as to achieve the purpose of tax avoidance.
Through the transfer pricing method, first, through the affiliated enterprises will be allocated to the cost of the higher tax burden of the region, effectively eliminating the profit, thus narrowing the basis of income tax. The second is to transfer profits through affiliated enterprises to regions with a lighter tax burden in tax havens. As an independent accounting enterprise, "purchase raw materials, equipment, talents and technology at high prices" and "sell products at low prices", the result is that the book profit is reduced or even loss, thus effectively saving income tax. This tax avoidance should be noted that the transfer method must be reasonable and legal, otherwise it will not achieve the purpose of tax avoidance, but may form the tax evasion.
2, other reasonable tax avoidance methods
Transfer pricing tax avoidance at the same time, you can use tax incentives to set up a corporate structure suitable for tax avoidance. For example, for international tax havens or low-tax zones, special economic zones or business development zones and their tax incentives, many companies avoid taxes in the following ways to reduce the tax burden.
One is to set up a permanent business organization
Many investment and business enterprises take advantage of the preferential policies of special zones or economic development zones to nominally locate their enterprises in special zones or economic development zones, while their actual business activities are not conducted in the zones or not mainly in the zones. In this way, the enterprise in the non-special zone to obtain the operating income or business income, can enjoy the special zone or economic development zone tax relief care, special zone or business development zone outside the profit income can be transferred to the domestic headquarters of the enterprise to reduce the tax.
The second is to create a fictitious trust property so that the principal acts according to its will, forming the separation of the principal and the trust property, but the trust property business is categorized in the name of the international low-tax area, special zones or business development zones in the name of the enterprise, in order to achieve the purpose of evading tax obligations.
Additionally, tax avoidance can be achieved by fully studying the tax regulations and by making reasonable arrangements for the way the business operates and its finances. For example:
1). When a large transaction is at the intersection of two tax years (i.e., the end of the year and the beginning of the year), according to the principle of accounting treatment of the accrual system, the date of the transaction can be appropriately postponed to occur in the next year as far as possible, so that part of the income tax is postponed for one year to pay, and get the benefit of the profit side. If the tax amount of 1 million yuan is postponed for one year, calculated on the basis of 10% annual interest, the tax can be avoided about 100,000 yuan.
2). According to China's tax law, enterprises that incur annual losses can make up for them with the next year's income tax. If the income of the next year is not enough to make up for it, it can be continued to make up for it year by year, but the longest period shall not exceed 5 years. Certain enterprises can avoid the obligation to pay enterprise income tax by acquiring a loss-making enterprise and transferring the profits of the enterprise to the loss-making enterprise.
3). For the foreign-invested enterprises enjoying the "two exemptions and three reductions", they should try to transfer their profits to the affiliated enterprises at the initial stage of operation, and try to continue the profit-making year and make up for the losses from the sixth or the seventh year onwards. In the second five years of the company's operating life, the profits will be transferred to the enterprise, thus maximizing tax avoidance. It is also possible to acquire this type of business and divert the profits to avoid tax.
There are different ways of avoiding taxes for different taxpayers. The managers of the company need to study all economic phenomena related to tax collection and payment activities or consult tax experts in order to find out ways and means without legal trouble. Company managers should study the knowledge of the law, use the full range of tax benefits, master various methods and participate, apply and improve them in practice. Through the enterprise organization and business mode, structure adjustment and reasonable financial arrangements, in order to achieve the maximum degree of tax avoidance purposes, within the scope of the law for the enterprise to maximize the benefits.