Tax planning refers to maximizing the tax benefits of enterprises or individuals through reasonable financial arrangements and decision-making under the premise of complying with tax laws. Undistributed profit is the retained earnings accumulated in the course of business operations, usually including net profit, undistributed dividends, etc. In order to reduce the tax burden on undistributed profits, the following 4 tax planning strategies can be adopted:
1.Tax deferral strategy
Undistributed profits can be distributed in a timely manner in accordance with the provisions of the tax law, or they can be temporarily left undistributed and left within the enterprise for expansion of reproduction or investment. If you choose to defer your taxes, you can distribute undistributed profits to shareholders or other investors at some point in the future, reducing your business's overall tax rate. For example, there is an option to keep a portion of undistributed profits on the books in the early or development stages of the company to obtain a higher capital gains tax rate;Or when the company's profitability is weak, a part of the undistributed profits will be used to increase fixed assets or R&D investment to improve future profitability.
2.Dividend policy adjustment strategy
Enterprises can formulate different dividend policies according to their own situation. For example, undistributed profits can be distributed to employees as bonuses or benefits to reduce the company's income tax burdenor use undistributed profits for buybacks** to reduce the personal income tax payable by shareholders. In addition, other dividend methods can also be considered, such as cash dividends, splits, etc., to meet the needs of different shareholders.
3.Asset restructuring strategy
Undistributed profits can be reconfigured through asset restructuring to optimize tax benefits. For example, undistributed profits can be used to acquire part of the equity of other businesses to gain more control and enjoy corresponding tax incentives;Or use undistributed profits to purchase ** bonds in order to receive tax-free treatment of interest income. In addition, through mergers, divisions, etc., the expansion of the scale of enterprises and the expansion of business scope can be realized, so as to improve the comprehensive competitiveness of enterprises and reduce tax pressure.
4.Business combination strategy
Enterprises can incorporate undistributed profits into the new enterprise by way of merger by absorption or new merger, so as to achieve the purpose of reducing the tax burden. The new enterprise after the merger can enjoy the preferential tax policies enjoyed by the two enterprises before the merger, and at the same time, it can also avoid the problem of double taxation.