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International Tax Planning – How To Make It Work For You

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International Tax Planning – How To Make It Work For You

2021-02-05T09:25:05+08:00January 7, 2015|Comments Off on International Tax Planning – How To Make It Work For You

International tax planning includes matters such as foreign tax laws, tax treaties, and resident status for taxation purposes. Many savvy taxpayers have gained benefits from international tax planning.

International tax planning refers to the process that a multinational organization employs in order to fulfill its tax obligation in all the areas where it operates.

International Tax Planning

A proper tax plan must be able to submit itself to changes in regulations, treaties, and opportunities.  This will help the multinational company to reduce its tax obligations to a minimum.  In addition to this, international tax planning efforts must not be seen as attempts towards tax evasion. If this happens, the corporation is likely to face a serious backlash from the authorities of the host country.

So what are some of the things that you should look into when you are thinking about international tax planning?

Tax Laws

Before any process of tax planning commences, it is important that the tax laws be studied carefully in order to avoid a situation where the corporation is found guilty of tax evasion.  No matter how tempting it might be, breaking the law in order to avoid taxes will ultimately prove to be a costly affair.

Expertise

Once you have studied the Laws that are applicable in your situation, it is time to get the expertise that will see you through this process.  It is not enough to know where the loopholes are; it is also about knowing how best to make use of the existing loopholes.  Individuals who have worked in multiple countries are best placed to guide you through this process.

Confidentiality

Although all international tax planning must be legal, this does not mean that every thing about the process have to be laid out in the open.  Confidentiality is an extremely important part of international tax planning and without it, one is likely to raise unnecessary bad publicity especially when the gains being made by the corporation are high.

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Corporate image

Since corporations are meant to serve the public, it is not just about legality of ethics.  It’s also about the image.  If you as a business decide to engage in tax avoidance activities by passing of funds through tax havens that have been for a long time associated with drug dealing and money laundering then it is very likely that you’ll create a negative image in the minds of customers.  Although it may not be illegal, the consequences may be disastrous.  It is therefore extremely important that in order to avoid negative publicity, avoid nations that will come with a negative connotation.

Once an organization or a corporation has gone through all these things, then it will be very easy for them to set up a functioning system that will help them reap the maximum benefits from international tax planning. 

All in all, tax professionals – whether working for the organization or hired as consultants must stay up-to-date with changes in the politico-legal environment so as to protect the corporation from losses or negative publicity.  This way, it will be quite difficult for the corporation to be caught unawares as a result of new legislation or changes in the political ideology.

International Tax Planning – How To Make It Work For You FAQs

Claiming Double Tax Relief – What is double tax relief (DTR)?2020-06-23T15:30:03+08:00

Foreign income earned by a Singapore company may be subjected to taxation twice. Once in the foreign country, and a second time when the foreign income is remitted into Singapore.

A double tax relief (DTR) is the credit relief provided for under an Avoidance of Double Taxation Agreement (DTA) to reduce this double taxation. A DTR is granted by allowing the Singapore tax resident company to claim a credit for the amount of tax paid in the foreign country against the Singapore tax that is payable on the same income.

A company is a tax resident of Singapore if the control and management of its business is exercised in Singapore.

What is an Avoidance of Double Tax Agreement?2020-06-23T15:29:36+08:00

An Avoidance of Double Taxation Agreement (DTA) is an agreement signed between Singapore and another country (a treaty country) which serves to relieve double taxation of income that is earned in one country by a resident of the other country.

It makes clear the taxing rights between Singapore and her treaty partner on the different types of income arising from cross-border economic activities between the two countries.

The DTA also provides for reduction or exemption of tax on certain types of income.

Only Singapore tax residents and tax residents of the treaty country can enjoy the benefits of a DTA. To find out who are our treaty partners, please refer to the List of Avoidance of Double Tax Agreements.

What is the procedure of taxing a company(both foreign and local) in Singapore?2020-06-23T15:29:13+08:00

A company, regardless of whether it is a local or a foreign company, will be taxed on its:

  • income accruing in or derived from Singapore; or
  • income received in Singapore from outside Singapore

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