In business, taxes are certainties that cannot be avoided. Doing business in the Philippines also means having to deal with various kinds of taxes in practically every aspect of your operation.
Taxes make up a large part of your business expenses, so it is important to manage them properly. Good tax management will help you avoid unnecessary taxes and prevent tax bankruptcy, while preventing you from getting in trouble with the law.
Tax Planning
Tax planning involves coming up with strategies that will minimize your tax expenses as effectively as possible. This usually means identifying opportunities for tax incentives, tax breaks, tax credits, and others.
For example, the Philippine government has devised various schemes to encourage investments in export industries, including Business Process Outsourcing and IT-related services. Among the incentives given to investors are tax holidays, tax credits and exemptions from custom duties.
In tax planning, these incentives and the company’s eligibility for them will be considered. This could affect a number of important issues, including how the company will be structured and where to locate the business.
Tax savings are also available in other areas of doing business, such as in how transactions are carried out, or how employee salaries and benefits are structured. Good tax planning will help your company take advantage of applicable tax-saving laws, beginning with determining fiscal and capital structures at incorporation.
Compliance with Tax Laws
Just as you can enjoy available tax benefits, you also have to make sure you comply with the regulations that come with them, or lose your privileges.
Non-compliance with tax laws can also lead to hefty fines and costly proceedings. From the start, you have to identify your tax obligations, and the procedures and deadlines on filing each type of tax.
A 2015 study by Price water house Coopers showed that the Philippines has one of the most difficult processes for paying taxes in the world, as well as the highest income tax rate in Asia. Businesses have to pay around 36 different fees and taxes annually.
Without effective tax management, it’s easy to get lost in this labyrinth of tax requirements and processes, and risk heavy fines and penalties for missed or erroneous filings.
Acquisitions, Dispositions, and Spin-Offs
Financial strategy could involve mergers, acquisitions, dispositions and spin-offs. When assets are transferred through these actions, applicable taxes also have to be planned for and managed. In mergers and acquisitions, for example, taxable tangible assets have to be distinguished from non-taxable intangible assets.
Spin-offs may be structured as taxable or non-taxable, depending on the preferences of the parent company and the subsidiary. Dispositions, on the other hand, may be utilized to reduce capital gains tax in a fiscal year.
How We Can Help
Our financial knowhow, combined with our legal expertise, allows us to assist businesses in coming up with an effective tax strategy that will reduce tax expenses, and comply with relevant tax laws. Here are some of the services we offer:
- Help in structuring the company’s fiscal and capital organization
- Advise on the value of mergers, acquisitions, spin-offs, and the like
- Identify available incentives and conduct procedures for eligibility
- Help identify financially advantageous locations for the business
- Conduct tax audits
- Manage compliance with tax regulations
- Help in the preparation and filing of Income Tax Returns
- Represent the company in any tax hearing or controversy with the BIR
