Effective Tax Planning With the Right Choices

Effective Tax Planning With the Right Choices

Tax planning to escape conventional taxes is possible due to the nature of these businesses, a large part of their value is concentrated in intangibles (intellectual property), as well as in the expectation of future gains (valuation) and there is no physical presence of these companies in the transactions in which they participate. The tax systems of the vast majority of countries are not yet prepared to deal with this model in which remittances that could be considered profits and enter the tax base are moved as royalties on the use of intellectual property, without the scope of the tax.

The Concerns in Europea

The European concern for taxes is relevant, insofar as these intermediary companies manage to escape the incidence of traditional taxes, such as IRPJ and ISS, and the burden ends up falling on other actors. These digital giants of the shared economy usually collect Income Tax in the countries where they have their headquarters – usually located in jurisdictions with very little tax incidence. Uber, for example, uses the Netherlands and Bermuda as the destination for most of its income. Airbnb, on the other hand, has physical operating bases in the United States, China and Ireland. It should be remembered that such companies have not yet recorded profits on their balance sheets, which means that they do not incur the income tax triggering event.

What the Companies are Doing

In relation to service tax, these companies maintain that they only mediate between those who are providing the service (accommodation or transportation, for example) and the final consumer. Therefore, they would not be subject to the ISS tax levy, in view of not exercising the traditional activities subject to the encumbrance.

  • Faced with this scenario, the central idea of ‚Äč‚Äčnational governments in terms of tax policy is to avoid or reduce the possibility that platforms based abroad cause erosion of tax bases, through the transfer of benefits to countries with low corporate income taxes.
  • Some particularities of these businesses are noteworthy: their rapid appreciation in a short period of time, leaving several traditional companies miles away in market value; the revenues generated by these digital players also reach astronomical volumes and figures.
  • Despite the huge volumes of operations, most of these companies have not yet posted a profit on their balance sheets; this scenario of uncertainty regarding the financial profitability of these platforms has generated distrust and doubts among investors.

Commercial houses and financial institutions offer the young adult segment multiple possibilities of accessing credit cards. However, the reality is that many of them do not have the financial means to pay and the debt increases in relation to the interests established by the conventional maximum rate.Go for the taxfyle’s sales tax calculator for taking the care of the taxes there.

For You: Define your budget

How much money do you have? Once you have defined this, you can think about investing, always bearing in mind that you must use your own capital. This is a smart move to never put your business at risk.

Johny Louria

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