Tax optimization

Tax optimisation – what is it?

Tax optimisation is a much discussed topic today. The tax burden is a significant obstacle for many companies, so it is not surprising that in many cases they try to ease their tax obligations as much as possible. However, it is important to remember that taxes can never be completely avoided.

It is, however, possible to optimise tax liability quite effectively and take advantage of tax optimisation opportunities. Tax optimisation is a fairly broad term that encompasses a multitude of procedures and processes, often from many different disciplines. The common denominator and goal is to reduce the tax burden on society.

Depending on the type of company, the line of business and other important factors, it is possible to effectively reduce a company’s tax burden. However, it is necessary to be aware of these factors and to know whether the company’s operations can be optimised with a view to reducing the taxes the company is liable to pay.

Is it legal?

Tax optimization is a concept that is often incorrectly confused with tax evasion and other illegal activities. It should be strongly pointed out that tax optimisation is a perfectly legal method of using the possibilities of the legal system to reduce the tax burden and to reduce certain taxes.

It is not an illegal activity and the purpose of tax optimisation is not to avoid taxes through illegal means, as is often presented. It is clear that taxes are such a significant burden that companies try to eliminate them, often illegally. That is to say, tax avoidance and similar illegal activities.

Optimisation, by contrast, is a way of using mainly foreign structures and finding ways in which the specific effects of tax liability can be minimised. Tax havens are often referred to in the context of tax optimisation. These are countries with very low or no taxation.

Very low taxation, together with the other advantages of these countries, is the main motive for using these countries to mitigate the tax burden. However, taxes can be optimised in other ways. In some cases, it is sufficient to channel the movement of goods or adjust cash flows appropriately.

There are many ways to save on taxes and it always depends on the individual case. Although there are cross-sectional similarities across almost all companies, there is no single way to optimise tax liability.

It is always necessary to carefully examine all the relevant elements of a particular case and only after considering all the possibilities to choose the best way of tax optimisation.

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