Tax avoidance

Tax avoidance (including tax optimization ) refers to the use of legal ways and procedures to reduce the tax burden from businesses and individuals. The Tax avoidance is basically for all control modes possible, but in the foreground are to that extent regular income taxes. Distinguished from tax avoidance is the non-legal tax evasion. Colloquially often spoken in the context of tax avoidance and tax loophole.

The tax burden is calculated as the product of the tax base and tax rate. Consequently, in the context of tax avoidance strategies to minimize the tax base and / or the law applicable to this tax rate, the latter especially in the context of residence or choice of location.

In addition to an absolute tax savings often also only a positive interest rate effect is sought in the context of tax avoidance strategies by positive taxable income will be relocated in the future. This is especially true for many tax -balance sheet arrangements with companies.

Tax avoidance case of natural persons

Tax avoidance is legal any conduct which leads to the reduction of tax payments. A long-term tax avoidance strategy is the choice of residence in a country where deemed advantageous tax environment (see also: tax evasion ).

More tax avoidance strategies are example. :

  • Marriage to use the income splitting can
  • Purchase of diesel cars to reduce the fuel tax burden
  • Reducing tobacco consumption, to reduce the tobacco burden
  • The assertion of losses from media fund
  • Relocation of capital income in the high tax-free allowances for children
  • Deferral of gains on zero coupon bonds until a time with a favorable tax rate (see also bonds Tripping )
  • Purchase of scrap property to generate loss

In many tax jurisdictions, there are different tax rates depending on the type of income. This applies in Germany, the withholding tax on investment income, which falls out of the system of comprehensive income tax. This can be done by an appropriate asset allocation (eg investments in shares rather than in their own individual company ) a tax avoidance by selection of the types of income.

Tax avoidance by companies

In the corporate tax law a variety of opportunities for tax avoidance exists. A distinction is made in this respect in particular between tax avoidance in the national and international context.

National Tax Law

For companies exist many ways to minimize the tax base. For companies, this must be accounted for by minimizing the gross assets (assets) and / or maximization of debt (liabilities) can happen. For this purpose, to make negative, positive Passivierungswahlrechten of use of any activation voting rights in the tax base. In the German tax accounting law, however, there are no disclosure option rights. Furthermore, the values ​​of assets are possible to minimize and maximize the amounts of liabilities. For this purpose, arising in German tax accounting law a variety of possibilities in the context of open valuation options and discretions.

A classic means of tax avoidance is the choice of an optimal tax depreciation method (minimization of the gross assets ). In Germany here a long time the declining balance depreciation for wear and tear ( depreciation ) with change -line method was prevalent, which led to a positive interest rate effect. As part of the corporate tax reform in Germany in 2008 the possibility of declining balance depreciation in the tax was abolished.

Considerable scope for tax avoidance arising from the possibilities of the horizontal and vertical offset losses. Thus, losses can be carried forward in profitable years.

An example of the avoidance of sales tax payments is the preservation of the status as a tax- exempt small businesses by limiting the annual turnover to the appropriate limit (currently € 17,500 ) is carried out.

For countries where local ( municipal ) taxes collected, such as the trade tax ( Germany ) in Germany, so can be a tax optimization in the context of national site selection, provided that the tax rates vary from municipality to municipality. In Germany, the assessment rates of business tax in the individual communities vary considerably in part, so here possibly by a clever choice of location significant tax savings.

A long-term tax avoidance strategy may begin at start-ups or conversions already in the choice of legal form if different legal forms are taxed differently. In Germany and many other countries, corporations opaque, unincorporated companies, however, are taxed transparent. At high top tax rates of personal income tax, therefore, may be tax advantageous than partnerships corporations ( with high profits ).

International Tax Law

For companies with activities in two or more tax jurisdictions, the tax optimization is complemented in purely domestic situations by the tax- optimal design of international activities. The goal here is to minimize the Group's tax load, ie the sum of the tax payments of the individual Group companies. The international tax planning concerns grds. Activities along the entire value chain, from procurement to sales ( Tax Efficient Supply Chain Management).

In international companies are used partly highly complex tax ​​planning with the objective of minimizing the Group's tax load, specifically the advantages of individual tax jurisdictions to be used. An example of such complex designs is the strategy Double Irish Dutch Sandwich With a.

Avoidance of double taxation

A major objective of tax planning in the international group is the avoidance of double taxation of income. Since the Federal Republic of Germany with almost all economically important countries has double taxation agreements, this is grds. guaranteed in most internationally active German companies.

International tax differentials

The international tax planning starts with the fact that the corporate tax law of the respective tax jurisdictions significantly different from each other to some extent. One speaks in this context of an international tax differentials. The tendency here are the traditional industrial countries ( First World countries ) as a high- tax countries, on the other hand to characterize emerging markets rather than low-tax countries. In recent years, however, here is an approximation to watch, with international trend is towards a reduction in the corporate tax burden (Race o the Bottom ). Germany is currently having an effective average corporate tax rate of about 30 % international in midfield. Often play in international tax planning tax havens a major role. In addition to classic tax havens such as the Channel Islands, the Cayman Islands or the Bahamas for many years also offer industrial countries such as the Netherlands or Ireland certain tax advantages for international companies, such tax benefits ( intragroup ) finance companies.

Site selection and relocation of functions

The use of international tax differentials is done in the context of international tax planning by a shift from value-added activities to low -tax countries. This can be done both by the choice of location ( subsidiaries, plants ) as well as the relocation of individual activities ( transfer of functions ).

Transfer pricing policy

A very important role in international tax planning play intercompany transfer pricing. They are elected at the exchange of services between Group companies in different countries so that the income in the country is increased with the lower tax burden and decreased in the country with the higher tax burden. Example: Returns the Volkswagen plant in Wolfsburg platforms to the Group subsidiary Skoda in the Czech Republic ( lower tax burden than Germany ), so are to be set as low as possible to VW Skoda payable unit prices for the platforms.

Loss of use

The international group also arise further possibilities of use of losses than in purely national companies. A special form of international loss of use is the so-called double dipping. In this case, one and the same losses in two tax jurisdictions will be charged twice tax deductible.

Designing abuse

Although tax avoidance strategies are legal definition, in principle, is in the Tax Code the offense of abusive tax avoidance codified ( § 42 Tax Code (AO) ). Then there is designing abuse, if the taxpayer is a legal organization for the purpose of tax avoidance selected, which is economically unreasonable. The tax office is set in such a case the tax as they would have been incurred if a commercially viable design would have been elected.

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