We agree that the main objective of setting up a company is to increase profit and reduce expenses, right!

One of the expenses incurred by the taxpayer is the payment of taxes, which contribute negatively to reducing the profit available to the businessman-capital investor.

But, with good planning, there are legal solutions to reduce tax payments, enabling an increase in the profit margin. In this article, we will help you understand in a simple way how to achieve this goal. Interested? Continue reading!

What is tax planning?

Managing a company involves the most diverse risks and decision-making on different subjects. This is exactly where tax planning can be a great ally.

Tax or fiscal planning is the legal way for taxpayers to reduce their tax burden. It is the activity of examining ways in which an economic activity can be carried out, and choosing the one that is most advantageous from a tax or fiscal point of view.

A common practice is tax avoidance, which is one of the instruments for carrying out tax planning. It is the taxpayer's act that seeks to delay, reduce or avoid the incidence and payment of taxes, through the adoption of lawful, legitimate procedures accepted by tax legislation.

Accounting specialists have technical knowledge on the issue and will be able to guide the work so that a decision can be reached on the best paths to be followed.

Types of tax planning

From a legal perspective, which exclusively considers tax effects over time, there are three types of tax planning: Preventive, corrective and special.

Thus, preventive planning is a means of guidance, with procedure manuals, prepared before any wrong choice is made.

Corrective planning is when an abnormality is detected and alternatives are then studied to correct the identified inconsistencies.

And special planning takes place depending on a certain fact that directly impacts the company's operations, and must occur whenever the organization has events that will impact its operations in a decisive way. Corporate restructuring processes (spin-off, merger, incorporation, association, etc.).

How to do tax planning

A businessman who does not adopt tax planning ends up paying taxes in a way that would not be the most beneficial for the company, he would most likely be spending more than he should, failing to invest in other areas.

There are several ways tax planning can take place, the professional who carries out this work must analyze aspects such as:
- Carry out a historical survey of the company, identifying the origin of all transactions and choosing the least costly action for future events.
- Check the occurrence of all events generating taxes paid and analyze whether there was an undue charge or payment of a higher amount of tax.
- The possibility of tax compensation, in accordance with the law.

Tax compensation is a type of extinction of tax obligations (Chapter III of Law No. 15/2022 of 26 June).

Two relationships are dissolved: (i) tax credit and (ii) tax debt to the Tax Authorities. This means the parties (Taxpayer and Tax Authorities) are, at the same time, each other's creditor and debtor.

- Whether or not the products sold or produced by the company have tax substitution;

This case occurs when, by law or tax rules, the tax payment is required from a person other than the taxpayer (article 11 of Law No. 15/2002, of 26 June).

In addition, for goods that go through several processes before being sold to the final consumer, tax substitution becomes a way of taxing a product just once

- The company's field of activity, as well as the profile of its customers.
It is the definition of which segment a company will operate in. Separated into three categories, industry, commerce and services, within each there are different possibilities for action, such as manufacturing products, selling or providing services.

- The best tax framework for the company.
The tax framework is a classification relating to the calculation of taxes on a company. In other words, each type of tax framework has defined tax obligations and tax burden.

In Mozambique, there are several taxation options for Legal Entities (VAT, ISPC, IRPS, IRPC), each with its own rules and limitations. Therefore, the choice must be made intelligently to avoid problems with the tax authorities or paying more taxes than necessary.

- The financial operations carried out;
- The possible use of tax credits on purchases made;
Non-cumulative tax credits.

Once these aspects are analyzed and framed, the business pays less tax, is regularized and is able to become more competitive. For this reason, it is worth having the support of a qualified accounting service specialized in serving companies. This way, it is possible to ensure that the tax burden is reduced within the law and without presenting risks to your business.

IMPLICATIONS OF POORLY PREPARED TAX PLANNING

Tax Planning that goes against the precepts of current legislation can cause the taxpayer to have problems with the tax authorities, being subject to the penalties defined by law.

An improperly prepared Tax Planning can generate tax evasion, instead of tax avoidance.

Thus, in its strictest sense, tax evasion is the illicit form of tax savings, distinguishing itself from avoidance, which typifies lawful conduct.

It is the practice of an act that aims to:
- Omit information, or make a false statement to the authorities;
- Defrauding tax inspection, inserting inaccurate elements, or omitting operations of any nature, in a document or book required by tax law;
- Forge or alter invoice, invoice, cash sale, or any other document relating to the taxable transaction;
- Prepare, distribute, provide, issue or use a document that you know or should know is false or inaccurate;
- Making a false statement or omitting a statement about income, assets or facts, or employing other fraud, to avoid, in whole or in part, paying the tax

How to put tax planning into practice?

It is not viable for the entrepreneur to prepare tax planning on their own. After all, this is an activity that requires a lot of knowledge about accounting and legislation.

So, the best tip we can give you on how to put tax planning into practice is to hire a quality accounting service. Specialized professionals will collect information about your company, analyze scenarios, apply different methods to save attributes, among other necessary activities.