Paying taxes is an obligation required of all corporations. Here’s why corporate tax planning matters greatly to your business.

For businesses, there are many factors taken into consideration in deciding its tax liability. Some factors used to determine a business’ tax bill include:

• Location: Tax rates differ among different physical locations. Some countries are considered tax havens because businesses there are subject to minimal taxation; large corporations usually try to seek out these tax havens. Apple, for example, recently switched its tax haven to the Island of Jersey after Ireland made changes to its tax laws due to international pressure. Until recently, Amazon had its tax haven in Luxembourg and Starbucks in the Netherlands.
• Business structure: The taxes paid by an organization varies significantly depending on how it is structured. An organization that is non-profit is not subject to any tax liabilities while for-profit organizations are taxed. An example of a for-profit organizational structure is the Canadian-controlled private corporation.
• Tax credits: Tax credits issued by a province or country are usually beneficial in lowering an organization’s tax bill. Examples of tax credits issued by the Canadian government include the investment tax credit, apprenticeship tax credit, qualified property tax credit, among others.

Corporate tax planning is the development and implementation of strategies that result in lower tax liabilities by an organization. Given the complexity and variation of tax laws from one region to another, this is usually a lengthy and complicated process. Corporate tax experts are usually hired to develop and implement corporate tax plans.

When properly executed, corporate tax planning offers significant benefits to an organization. Some benefits of corporate tax planning include:

• Lower tax rate: Organizations may be able to lower their effective tax rate using measures not commonly known or advertised.
• Reduced taxable income: Organizations can implement measures to reduce the amount of income that gets taxed, with or without a change in the tax rate.
• Flexibility in paying taxes: Organizations can time the payment of their taxes to minimize the financial impact.
• Tax credits: Tax planning enables organizations to take advantage of tax credits that are favorable to its business

There are several types of corporate tax planning. The choice of tax plan used by an organization is dependent on the unique needs of the organization as well as its goals. Types of corporate tax planning include:

• Short-range tax planning: This is usually done annually to meet specific yearly goals
• Long-range tax planning: This is done over a longer period of time to meet specific goals and objectives
• Permissive tax planning: This is when tax plans are made using specific provisions within the law
• Purposive tax planning: This is when plans are made to maximize returns to an organization. Some organizations resort to misleading the law using this method.

At Ebrahimjee & Essaji Professional Accountants, we are Ontario based tax professionals well versed in the development of tax plans for your business. We will assess your business’ needs and develop a tax plan suited to your organization. For more information about how we can develop a tax plan for your business, contact us today.