Company Tax Planning will make you …

Seriously nobody wants to pay tax. Even the tax officers sitting in the Inland Revenue Board (IRB) don’t enjoy seeing a part of their salary taken away. It make a lot of sense for business to spend time on company tax planning. 

It is November 2021, and most likely you have submitted your personal and business’s income tax between April to August. Most of us usually only think of taxes only when it is time to file our tax returns. 

Why bother?

Handling our day to day operation is already so time-consuming. Why bother to spend the extra time to think about next year’s tax? There is no better thing to do?

Only the big giants need company tax planning?

We see in movies how gigantic companies can have so many, very posh looking, tie and coat wearing smart handsome lawyers at their services. It is so cool, right? 

It doesn’t just stop there, gigantic companies, the blue chips and the huge listed co will have a team of professionals hired in-house for the very purpose of taking care of the company’s tax matters. 

The question is do only the big boys need to worry about tax planning? 

That’s not quite true. Before we reveal the reason, let us take a step back and understand what is tax planning first. 

What is company tax planning? 

Tax planning is not just about coming up with an annual tax estimate and seeing how much you are paying as a tax instalment. 

At a high level, it is about taking a look at the entire finance of your business, ensuring that you pay the least amount of taxes possible when it comes to time for tax filing. 

“A pound less of tax, is a pound gained. “

There are many ways to approach company tax planning

The tax planning process takes into account many considerations. At each phase of the business life cycle (birth, growth, maturity to cessation), there are unique tax planning which can be utilised. 

There are many ways we can execute tax planning too. It will include the size and timing of purchases, expenses planning, incentive and grant utilisation. 

The tax planning process can also help you to select the optimal investment and structure out optimised retirement plans. 

Benefits of company tax planning

The following are three of the main benefits (there are many more) of tax planning : 

1. Maximise profit ;
2. Enable growth ;
3. Save time reduce error

1. Maximise Profit 

Ultimately the purpose of doing business is to optimise profit. The ultimate goal of company tax planning is to reduce the ringgit payout as tax. 

Regardless of what is your ground on paying taxes, we all will agree that being able to allocate more money towards growing the business is a delightful and positive thing. 

It is exciting to see how the business owners are shocked when they learned about the number of deductions, credits and incentives available to them that they never know about. Tax planning helps you to take advantage of every opportunity available to you, from day one. 

    2. Enable growth 

Seeing an accountant after the year ended to tweak your taxes will come with a huge tax penalty. Instead, when the decision-maker themselves has the tax planning know-how in hand it will change everything. 

Having the right tax strategy in place, help you have a more informed choice. You will be equipped to make financial projections, strategic business investment and cashflow planning. Most importantly understand how the changes you make to your business operations and strategy impact your tax obligations. 

Drives economy 

I realise this very late in my tax career, the very fact that: tax is a crucial part of the economy. 

The tax has long been used as a tool for the government to push the business community to move in a certain direction and to make people venture into government encouraged activities. By being up to date on tax, it is being in line with the big economy of the country. 

“Seriously to take advantage of opportunities, we must first know it exists.” 

Having a solid understanding of tax planning set the stage for this. 

 3. Save time, reduce error

If you are going on a long trip, why do you have a packing list? Exactly, it helps you to save time, reduce the chances of forgetting to pack what you needed. 

Having effective tax planning in place from the beginning saves you a lot of time throughout the year. One of the most common challenges faced by business owners is that they are too busy running day to day operations to focus on long term financial strategies. 

It is a real painful experience having to find ways to squeeze out money to pay for the heavy taxes and the penalties. More so it helps to save so much time when it is time to prepare your taxes return. Also, reduce unnecessary errors when filing. 

Here’s some common mistake I have seen clients make : 

• Making large purchases at the “wrong timing”;
• Purposely spending more than they normally would increase potential deductions, that would include things like buying the grand piano, that luxurious bag, expensive painting;
• missing out on timing to get approval for a special deduction. 

With company tax planning, you can know what you owe, well in advance of time. Ensure you make errors and reduce the chances of being audited. 

Should I have a tax plan? 

Especially with the current ever-changing political climate, our country is in. It is now more important than ever to have a tax plan. Every time there is a change in the political leaders there will always be a change in tax rules. Many business owners find out late that they owe more taxes this upcoming year than in previous years. 

Good company tax planning is part of a sound financial strategy. One of the very crucial components of your finances. When one venture into tax planning, you will realise you are more snap with your finances be it on a personal or business level. 

Unfortunately, many people overlooked this area and end up paying more taxes than they really should. Otherwise, they will engage in tax evasion activities and threaten the accountant to simply reduce their taxes without basis and end up with more worries, headaches and spending more precious time when they are faced with a tax audit. It is not worth it. 

How to start?

Either you do it yourself or you can always engage qualified tax consultants, do give it a thought and start taking action. Getting your business tax planning in place will surely give you a competitive advantage over the competition, retain more money in the business, and ultimately best of all reducing your overall tax liability legally and with peace of mind.