Tax planning is a forward-looking activity, as opposed to tax compliance or reporting, which reflects past events. Accounting Firm Vancouver companies are usually involved in this complicated area for the technical advice of accountants or tax lawyers.

Corporate tax planners design a plan for companies to minimize tax liabilities.

Being

Accountants understand that treatment varies depending on the type of business that conducts business. In Canada, regular corporations have to pay the annual income tax on federal income tax, and in the subsequent distribution of that income, the dividend-entitled individuals will also have to pay taxes. Some companies (usually those who do not offer shares on a public stock exchange) may seek to avoid double taxation by organizing themselves as S or limited liability companies. The Internal Revenue Service treats these special partnership-like companies insofar as the taxation of annual earnings applies only to the shareholders and not to the entity.

Jurisdiction

A fundamental aspect of corporate tax planning is determining which countries, states and cities have the opportunity to levy taxes on corporate activities. Each sovereign government has different rules for the imposition of taxes, which means that the arbitration of the jurisdiction can lead to differences in tax rates. Conversely, ongoing business developments, such as generating revenue from a new customer on the wrong side of a jurisdiction boundary, could trigger additional corporation tax liabilities.

Timed coordination

Corporate tax planning opportunities often result from determining the appropriate period of time to recognize a revenue or expense item. Deferring revenue recognition to a future period or accelerating spending deductions to a current period results in positive cash flows and savings due to the time value of the money. Strategic exploitation of discrepancies in accounting rules compared to tax accounting can help to create time differences that bring tax benefits. Examples of timing differences used by tax plans for US companies include deferring the taxation of foreign subsidiaries' income and accelerating depreciation on qualified fixed assets.

Attributes

Tax attributes are favorable features of a company's tax position that planners can invoke to offset tax liabilities. The IRS allows companies to claim these attributes in the current year and transfer them over the coming years to maximize benefits. Attribute planning typically involves either the generation of additional claims (eg, by analyzing which activities meet the definition of research and development or when certain types and sets of attributes are to be used.

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