Taxes might not be your favourite topic, but we all need to admit that financial planning is the right strategy to reduce your deductions. All jurisdictions provide special benefits that help online business legally save money in order to maximize your profit.
Choose a proper business structure
Before you register your online business think about a proper type of business structure that enables you to pay less taxes. In some jurisdictions small business can be set up as a sole proprietorship that can benefit from special tax regimes with lower rates compared to other legal forms such as LLCs, partnerships, etc. When your business grows, you may consider other business structures that allow more flexibility on business income taxation.
Consider moving your company to tax free zones
Some countries designate special areas for enterprises with tax exemption and special regulation to support economic growth of business. These special economic zones can provide exemption on taxes and customs duties. Usually these zones are specific territories located in specially designated areas. These territories are supported by governments that provide special legislation to promote trade, create new job places and support innovations in their countries. Sometimes, it can be a merge of two or more countries.
In some countries such zones are available for both offline and online business. These can be free port area, free trade zone or innovative clusters. It is important to note that such countries attract not only local companies. Entrepreneurs from all over the world relocate their businesses to other countries in order to boost their economic growth. There can be special rules on business relocation for foreign companies and businessmen.
Benefit from what you spend
If your online business requires that you purchase equipment, software, goods and otherwise spend money on your entity, then under tax law of most countries you are able to reduce your taxes by deducting expenses. For instance, the cost of buying equipment, software or goods can be deducted from taxable profit. The same rule applies to travel expenses. You can combine personal and business travel in order to benefit from it. If you or your employee takes a medical leave, this can also be covered by obligatory medical insurance that you pay for along with your employee’s salary.
Reduce taxes if you pay for state obligatory medical and pension insurance
Though it may differ from jurisdiction to jurisdiction, but generally you are allowed to reduce taxes if you pay for state obligatory medical and pension insurance on a quarterly basis. That said, if you pay for such insurance quarterly, then when the time comes to pay taxes at the end of a year you can reduce your taxable income on the amount paid for obligatory insurances.
Monitor legislation changes
You should always keep track on legislation changes related to taxes. Tax laws and practice change constantly each year. As we monitor legislation in various countries for our clients, we see that most of these changes have a positive impact on business, both online and offline.
In overall, it is a wise practice to think about your tax strategy in order to plan ahead on months and years to come.