1st objective of economic action

In the meantime, it is no longer only important to implement the business model of a company in the best possible way when acting economically, but rather to make meaningful decisions in the overall economy. It is important to make important decisions at different times during and even before the start of the business activity of a company. After all, for a company, everything boils down to maximizing consumption opportunities. Thus, it is important to distribute as high a percentage of the earned income as possible or to save for future investments in the company. However, there is a reducing factor that is rather unknown to most entrepreneurs in this calculation. Because taxes are an enormous burden for economic activity in companies.

Since sometimes different tax rates or different legal provisions apply to different situations, this changes cash flows and, if necessary, product prices. This is why it is important to include taxes in corporate planning right from the start.

In addition, it is important to know the existing differences in burdens for different types of companies, such as corporations or partnerships, as well as for different facts and in the best case to avoid them. Tax planning aspects must be taken into account in particular.

2nd tax planning taking into account economic activity

In the following, tax planning is explained as a forward-looking part of a functioning company. In tax planning, it applies that by knowing possible alternatives for action, tax effects can be specifically fulfilled or avoided. The alternative courses of action are directly related to business activities and range from the choice of legal form to company purchases and company sales to international conversions.

2.1. Target direction

Through economic action, the goal for each company is to claim the highest possible tax benefits or to avoid tax disadvantages. The aim is to maximize the excess payment, especially after taxes, and thus to ensure the future viability of the company.

2.2. Requirements

In order to extend economic activity also to tax planning, it requires extremely good knowledge in domestic, but increasingly also in cross-border tax law. This includes in particular aspects such as the External Tax Act or the OECD BEPS Directive, which restricts certain tax arrangements.

Nevertheless, it is important to know the different facts to which the company may be subject. Often the question of the existence of the conditions for a taxation of corporate transactions is much more uncertain, if you are not an expert, than the calculation of the taxation itself. Thus, it is relevant that you know the prerequisites for specific tasks, especially before carrying out specific tasks, as well as alternative courses of action for these tasks. We take care of this situation conscientiously as your tax consultant. We also advise directly on the tax effects of various options and future-proof you and your company.

Furthermore, forward-looking tax planning and design consulting always take account of the latest case law in tax law. This also clearly distinguishes this area from tax evasion. If you are uncertain about past issues, we will gladly examine them for you and help with a self-disclosure in case of doubt. However, tax design optimizes exclusively applicable law for you as a client by tax optimizing the processes provided for by the legislature.

By becoming aware of the economic consequences of taxes, an entrepreneur uses their impact in the first place. It is important to work in advance on future designs through tax planning. Among other things, it is possible for companies to change your strategic decisions as the inclusion of corporate taxes makes action options worse or better. In principle, it is necessary to distinguish between two categories of decisions.

3.1 Ongoing operational decisions

By taking taxes into account, the costs of procurement operations can change. Because internationally, there are often different tax rates, which can affect, for example, goods prices. In addition, it may be of economic interest that different forms of financing are used. Because external financing often allows the deduction of the resulting costs and a reduction of the tax burden. But this also differs depending on the type of company used, as partnerships, among other things, the debt interest deduction applies.

In addition, especially in the case of distributions, the underlying tax rate of the shareholders and the legal form of the company must be observed. This has far-reaching consequences for you as an entrepreneur and for important annual processes in the company. In addition, restructuring of the company structure can easily circumvent taxation that is not advantageous.

3.2. Aperiodic Decisions

Tax planning and tax design can also be helpful for aperiodic decisions. In principle, for every tax planning, companies should first be checked for the correct legal form. In order to then achieve the individually appropriate legal form for the company and the associated shareholders, a restructuring into another form of company or a new corporate structure often has to be carried out. We often recommend a holding structure to our clients, which brings many advantages. If you have any questions, please contact us directly. Furthermore, the question of restructuring also arises in situations such as a cessation of operations or a sale of a company and often also in the case of relocations or a departure of the shareholders abroad.

Why the DOUBLE HOLDING is the best legal form!

4. relevance of tax planning for economic action

4.1. Improve after-tax results

The improvement of the after-tax result is accelerated by tax planning and tax design and has different consequences. Among other things, greater competitiveness can be achieved by making additional capital available for investment. Furthermore, the company value can be increased, which benefits shareholders and shareholders enormously. Because usually the distribution payments are also linked to it. In addition, a better after-tax result enables the company’s managers to be secured as well as improved pay.

4.2. Further effects of tax planning

In addition, detailed planning enables liquidity effects in tax payments as well as the already mentioned ranking change of alternative courses of action by including tax payments. Corresponding calculations are gladly prepared by us.