From a practical point of view, domestic tax avoidance means that enterprises avoid domestic tax obligations through various methods, ways and means. From a more realistic condition, business owners and financial managers need to solve different challenges.
Reasonable tax avoidance: what the boss can do
Tax avoidance, now long ago is not a topic suitable only for private exchanges. Now many business owners are exchanging how to avoid taxes, the success of the experience of everyone "group up and follow". The 10th National People's Congress has just come to an end, and issues such as tax policy, tax supervision and tax levels have been mentioned many times by delegates.
An enterprise operating point of view to analyze. If you can be a management decision-making level, from the point of view of the development strategy of the enterprise, such an operation is more suitable for you.
Switching to a "foreign" enterprise
China's foreign-invested enterprises to implement tax policies, so the transition from domestic enterprises to Sino-foreign joint ventures, cooperative enterprises and other modes of operation, is a good way to get to enjoy more tax reductions, tax exemptions, or tax breaks.
Registered to the "tax oasis"
Anyone in the special economic zones, coastal economic development zones, special economic zones and economic and technological development zones in the city of the old urban areas, as well as state-recognized high-tech industrial zones, bonded zones, set up in the production, operation, service-oriented enterprises and engaged in the development of new and high technology enterprises, can enjoy a greater degree of tax incentives. enjoy a greater degree of tax incentives. When choosing investment locations, SMEs can purposefully choose the above specific areas to engage in investment and production operations, thus enjoying more tax benefits (readers can refer to the article "Pushing Open the Door to the "Offshore Oasis" for the content of this section).
Entry into special industries
For example, the tax exemption for the service industry provides that child care centers, kindergartens, nursing homes, and welfare institutions for the disabled are exempted from business tax on the parenting services they provide.
Marriage introduction and funeral services are exempt from business tax.
Medical services provided by hospitals, clinics and other medical institutions are exempt from business tax.
Civil welfare enterprises that have placed "four disabled persons" to account for more than 35% of their production staff are exempted from paying business tax on businesses that fall within the scope of the business tax item "service industry" (except for advertising).
Individuals with disabilities are exempted from paying business tax on the services they provide.
Doing something about "administrative expenses"
Enterprises can increase the rate of bad debt provision, which goes into administrative expenses, thus reducing the profit of the year and paying less income tax.
Enterprises can try to shorten the depreciation life, so that the amount of depreciation increases, the profit decreases, the income tax paid less. In addition, different depreciation methods are used and the amount of depreciation charged varies greatly, which ultimately affects the amount of income tax.
Use but not "cost"
Private owners of small and medium-sized enterprises should take into account how the operation of the water, electricity, fuel costs, etc., family living expenses, transportation costs and all kinds of miscellaneous expenses are included in the cost of the product.
Today's business community, this item is frequently used. They will buy their own house, car expenses, and even the cost of children's daycare and school expenses are included in the company's business projects. This is not permitted by national policy, and although this method is not uncommon in today's business world, we do not advocate it here.
Reasonable increase in employee benefits
Private owners of small and medium-sized enterprises in the process of production and business operations, can be considered within the scope of not exceeding the taxable salary of the appropriate increase in wages for employees, medical insurance for employees, the establishment of workers' pension funds, unemployment insurance funds and employee education funds and other funds, corporate property insurance and transportation insurance, etc. These costs can be charged to the cost of the company. These expenses can be charged to costs, and at the same time can help private owners to mobilize their employees, reduce the tax burden, and lower business risks and welfare burdens. Enterprises can win good overall efficiency with lower cost expenditure.
Doing the article of "sales settlement"
Selecting different sales settlement methods to delay the time of revenue recognition. Enterprises should be based on their actual situation, as far as possible to delay the time of revenue recognition. For example, an electrical appliances sales company, sold 10,000 units of various types of air conditioners in the month, total revenue of about 25 million, according to the 17% sales tax, to pay more than 4.25 million in taxes, but the enterprise will immediately next month's incoming tax stamps to this month's deduction. Because of the time value of money, delaying tax payment will bring unexpected tax savings to the enterprise.
Reasonable tax avoidance: what the CFO can do
There are many commonly used tax avoidance methods, but they are generally no more than that: the use of national tax incentives, transfer pricing, costing, financing and leasing methods.
Use of tax incentives
The promulgation and implementation of the new tax law will be the power of tax exemptions and reductions to the State Council, to avoid the phenomenon of too many tax exemptions and reductions too chaotic. At the same time, the tax law and in the form of law provides for a variety of tax incentives, such as: high-tech development zones of high-tech enterprises to reduce the tax rate of 15% of the income tax; new high-tech enterprises from the year of commissioning of income tax exemption for two years; the use of "three wastes" as the main raw materials of the enterprise can be five years of reduced or exempted from the income tax; Enterprises and institutions that carry out technology transfer and its related consulting, service and training are temporarily exempted from income tax if their annual net income is less than 300,000 yuan. Enterprises should strengthen the study of preferential policies in this area, and strive to adjust the income of enterprises to enjoy a variety of tax incentives, maximize tax avoidance, and grow the strength of enterprises.
At the same time, the economic development zones around the country are now springing up, they opened the investment conditions are very attractive, most of them are to reduce the corporate income tax for a number of years, reduce a variety of fees and other conditions to attract capital, technology and talent. If your enterprise is a high-tech industry or encouraged industry, such favorable conditions of course become one of the priority factors for enterprises to avoid the tax.
Transfer pricing
Transfer pricing is one of the basic methods of tax avoidance, it refers to the economic activities of the two sides of the enterprise in order to share the profits or transfer of profits in the process of product exchange and sale, not in accordance with the market price, but according to the inter-enterprise **** the same interests of the pricing of the product method. Using this pricing method product transfer price can be higher or lower than the market fair price, in order to achieve the purpose of less or no tax.
The tax avoidance principle of transfer pricing is generally applied to related enterprises with different tax rates. Through transfer pricing, part of the profits of an enterprise with a high tax rate are transferred to an enterprise with a low tax rate, which ultimately reduces the total amount of tax paid by the two enterprises.
For reasons that cannot be made public, the tax avoidance behavior of some of the businesses and companies we have come into contact with has been kept anonymous. A company A is headquartered in a coastal special economic zone and enjoys a favorable income tax rate of 15%. The production of their products is done by Company B, which is based in the China region by Company A. Company B applies a proportional tax rate of 33%. Company A purchases 1 million pieces of product from Company B each year for sale abroad at a purchase price of $6.8 per piece and a selling price of $8.3 per piece. Obviously, the production cost of such products 5.2 yuan per piece, then the profits of these two companies and the tax payable has been very obvious:
Company A annual profit = (8.3-6.8) × 100 = 1.5 (million yuan)
Company A income tax payable = 150 × 15% = 22.5 (million yuan)
Company B's annual profit = (6.8 - 5.2) × 100 = 1.6 (million yuan)
Company B's income tax payable = 160 × 33% = 528 (million yuan)
Total **** income tax paid by companies A and B = 22.5 + 52.8 = 753 (million yuan)
For the purpose of tax avoidance. It is possible to transfer some of the profits of Company B, which has a high tax rate, to Company A. We already know that Company A buys products from Company B at a unit price of $6 and still sells them at $8.3, then:
Company A's annual profit = (8.3-6.0)×100 = 2.3 (million yuan)
Company A's income tax payable = 230×15% = 345 (million yuan)
Company B's annual profit = (6.0-5.2) × 100 = 80 (million yuan)
Company B should pay income tax = 80 × 33% = 26.4 (million yuan)
Companies A and B **** income tax = 34.5 + 26.4 = 609 (million yuan)
These two companies before and after the transfer of the profits of A, B, the two companies annual profits The total sum is: 1.5 + 1.6 = 3.1 million yuan; and the total profit after profit transfer is: 230 + 80 = 3.1 (million) yuan. Before and after the transfer of profits, the total profits of the two companies are still equal, only after the use of transfer pricing, the two companies they should pay income tax reduced by 75.3 - 60.9 = 144,000 yuan. As long as the companies can find two areas where the difference in tax rates is greater and trade and cooperate between these two companies, the greater the trade, the greater the tax savings will be.
Sharing of expenses
All expenses incurred in the course of a business's production and operation have to be amortized into costs in a certain way. Cost sharing means that the enterprise in the premise of ensuring that the necessary expenditure of the cost, find ways to find a balance from the accounts, so that the cost of amortization into the cost of the largest possible amortization, so as to achieve the maximum tax avoidance.
Commonly used principles of cost sharing generally include actual cost sharing, average amortization and irregular amortization. With a careful analysis of the depreciation calculation method, we can summarize the general rule: no matter which apportionment is used, as long as the expenses are amortized into the cost as early as possible, so that the greater the expenses amortized into the cost at an early stage, then the more it can maximize the purpose of tax avoidance. As to which apportionment method is most able to help the enterprise to realize the maximum tax avoidance purpose, it is necessary to calculate, analyze and compare and finally determine according to the time and amount of the expected expenses.
Tax avoidance through nominal financing
This principle is to utilize certain financing techniques to achieve the highest level of profit and the lowest level of tax liability. Generally speaking, there are three main channels for the funds needed for the production and operation of the enterprise: 1, self-accumulation: 2, borrowing (loans from financial institutions or the issuance of bonds); 3, the issuance of shares. Self-accumulation of bonuses is the enterprise after-tax distribution of profits, and stock issuance should be paid dividends is also as a way of after-tax profit distribution, both of which can not offset the income tax payable for the current period, and thus fail to achieve the purpose of tax avoidance.
Interest expenses on borrowing are deducted from pre-tax profits, which can be offset against profits and ultimately avoid tax.
Asset Leasing
Leasing is an economic behavior in which a lessor leases an asset to a lessee for a period of time specified in a deed or contract in exchange for a rent. From the lessee's point of view, leasing can avoid the burden of purchasing machinery and equipment and the risk of being protected from the obsolescence of the equipment, and because the rent is deducted from the pre-tax profit, it can be offset against the profit and achieve tax avoidance.
The above methods are just some of the methods and techniques that we have learned from our contact with corporate finance staff. We believe that there must be more smart ways to avoid taxes in the business world. But no matter what, we must remind everyone: tax avoidance must be legal and reasonable, otherwise it deviates from the original purpose of this article and the intention!
Since the beginning, we have been emphasizing the "legality" of tax avoidance. The 16th Party Congress and the 10th National People's Congress after the victory of accelerating the development of small and medium-sized enterprises has blown the trumpet. At present, many small and medium-sized enterprises are not easy to operate. How can SMEs realize their own strong innovation and economic vitality, legal tax avoidance may be a feasible way.