It is not new to the market that there are incentives for companies to invest and obtain advantages by saving taxes.
It turns out that, not always, entrepreneurs really know what types of tax incentives exist, their details, how they work in practice, and how they can benefit their business.
And, perhaps the reason for this is because of the complexity of the rules, rights, and duties included in these incentive programs.
Thus, the scenario ends up inverting, as companies would have problems participating in them, for example, if they do not meet the specifications stipulated criteria, and maybe excluded and even penalized in this process.
FIRST THINGS FIRST: WHAT ARE TAXES?
A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity) by a governmental organization in order to fund government spending and various public expenditures. A failure to pay, along with evasion of or resistance to taxation, is punishable by law.
Most countries have a tax system in place, in order to pay for public, common, or agreed national needs and for the functions of government. Some levy a flat percentage rate of taxation on personal annual income, but most scale taxes are progressive based on brackets of annual income amounts. Most countries charge a tax on an individual’s income as well as on corporate income.
CORPORATION TAX/COMPANY TAX
A corporate tax, also called corporation tax or company tax, is a direct tax imposed by a jurisdiction on the income or capital of corporations or analogous legal entities. Many countries impose such taxes at the national level, and a similar tax may be imposed at state or local levels. The taxes may also be referred to as income tax or capital tax. Partnerships are generally not taxed at the entity level.
Company income subject to tax is often determined much like taxable income for individual taxpayers. Generally, the tax is imposed on net profits. In some jurisdictions, rules for taxing companies may differ significantly from rules for taxing individuals. Certain corporate acts, like reorganizations, may not be taxed. Some types of entities may be exempt from tax.
Countries may tax corporations on their net profit and may also tax shareholders when the corporation pays a dividend. Where dividends are taxed, a corporation may be required to withhold tax before the dividend is distributed.
Most countries exempt certain types of corporate events or transactions from income tax. For example, events related to the formation or reorganization of the corporation, which are treated as capital costs. In addition, most systems provide specific rules for taxation of the entity and/or its members upon winding up or dissolution of the entity.
WHAT ARE TAX BENEFITS?
The Tax Benefit is a special taxation regime that involves an advantage or simply a tax relief compared to the normal regime, assuming a form of exemption, reduction of fees, deductions from the taxable income, amortizations, exclusion, credit, and/or other tax measures of this nature.
They are intended to increase segments of the economy and encourage individuals or companies to take certain attitudes, in addition to stimulating the country’s economy. Tax benefits are created through tax regulation, which is determined by federal, state, and local governments.
However, they can also be used to repair damage to the economy, such as that caused by the Corona Virus, or to maintain the availability and low prices of essential products.
While tax deductions, credits, and exclusions are benefits that reduce the amount taxpayers owe annually to federal and state governments, tax shelters are another form of tax benefit that can help to lower taxes through special investments. These are legal vehicles that provide taxpayers with a favorable form of tax treatment.
SOME TAX BENEFITS GRANTED
EXEMPTION
In cases of exemption, the tax is not levied on the specified operations or benefits.
REDUCTION
Tax reduction rule that benefits specific operations and benefits, reducing by a certain percentage the amount that serves as the basis for calculating the tax.
CREDIT
It gives the taxpayer the option of crediting a presumed amount in substitution for the use of any other credits.
ADVANTAGES OF TAX BENEFITS
The first reason that will make you pursue this right is the marketing-generated through investment in cultural, sport, and health projects. Your brand will be exposed to a wider audience and will be strengthened by being linked to a program with a social nature.
Another advantage involves your company’s finances. The money that would be collected is converted into a promising investment. But for this, it is very important to have well-established tax planning.
One of Link’s services is Identifying and maximizing tax benefits possibilities, elaborating projects to minimize import costs. If your company needs some help in that way, contact us!
