The end of the year always seems to be far away, although regarding financial, investment or tax strategy it is a myth; since, it is common to disregard those strategies throughout the year. Our aim is to present twelve valuable tips to avoid such risks on personal and corporate level.
On a personal level be aware to your:
- Wage maximum limit to avoid extra taxes due to productivity awards or similar; but, if not possible (fortunately), check below
- Expenses lower than deductible limit consider:
- Increase expenses on food (e.g., restaurants or supermarkets)
- A health insurance plan to you or family
- To invest in your education or family members
- Life insurance or retirement investment plans
- Donate to a qualified charitable institution
- Your animals veterinary expenses
- Invest in gold or similar to avoid taxes
On a corporate level issues are more complex, since extra variables influence the potential outcome. These variables depend on: i) the type of investment, ie., tangible or intangible; and, ii) financial corporate strategy.
Regarding a tangible investment it is important to understand some constraints: i) option reproductive or not; ii) if yes, likelihood to be used and usage rate deduction; iii) if not, to what extent that purchase has a negative impact.
An example is the difference between a machine or a tool for production and a car. If the company has a sufficient number of vehicles such investment may be inquired by the Tax Authorities, even if the purchase choice is an electric car; while, a machine or tool for production has no further implications (link to operational activity). In addition, the amount of investment required for each option may vary considerably depending on the business. For instance, a machine for molding can easily represent an investment above 500.000EUR.
When the aim is intangible options, health/life insurances or retirement saving funds, requires the analysis of two criteria: i) decisional equity; and, ii) argument consistency over time. Decisional equity acknowledges a principle of fairness, ie., to obtain the tax benefit the company cannot discriminate workers with similar functions, responsibilities or level of hierarchy. An example is a random rule for workers to have access to healthcare insurance; although, a potential fair rule is related to hierarchy or years within the company. This rule must be consistent over time, ie., unjustified changes may involve an inquiry from the Tax Authorities. Thus, these criteria are simultaneously interdependent and mutually exclusive.
Another issue to consider upon life insurances or retirement saving funds is the legal limit of tax benefits, ie., percentage regarding the total amount of salaries.
