Paying taxes is one of the more uncomfortable realities of running a business.
The good news is that it is all a matter of how you look at it. With proper tax planning, taxes don’t necessarily have to be painful for your fledgling or thriving business.
Ask yourself the following questions:
• Have you invested in obtaining an understanding of the tax laws? Knowledge is the first step to effective compliance.
• Are you operating your business in the most tax efficient structure?
• If you are the owner of your own business, are you being remunerated in the most tax efficient way?
• Are you making the most of the tax allowances that are available to you and the company?
• Are you aware of the tax implications of your business decisions - including the relationship between Corporation tax, VAT, PAYE and even capital gains tax?
• On a more long-term approach what steps have you taken to minimize the tax you will have to pay on the sale of your business, or on passing it on to the next generation, or even during your retirement, and even on your death?
Timely tax planning can prove beneficial to both large and small or medium sized companies. There is the wrong perception by business managers, that once PAYE, VAT and Corporation Tax returns are filed with RRA on time, and the relevant taxes paid, then the RRA are “at bay”, and all tax issues have been dealt with.
However, as many taxpayers and business owners know, this is not always the case.
Many busy directors of successful companies are often just too busy to consider further aspects of taxation.
Regular meetings with your accountant or tax adviser can, however, ensure that you are actually complying with the requirements of the law, and can also reveal possible tax planning opportunities for your business.
Efficient tax planning ensures tax minimisation for the company and wealth maximisation for the investors. However failure to compute the right taxes upfront does not save tax, as RRA will eventually find out.
Having said that, the aim should be to get it right, therefore underpaying or overpaying are both not good.
When it comes to managing wealth, it is not what you earn that is so important, but how much of it you get to keep! Investing little time in tax planning can be very rewarding.
Through proactive tax planning, you will be able to understand the personal and business taxes you are liable to pay, and look at ways to minimise them.
Every entrepreneur or business person should engage the services of a tax expert to guide them through the tax maze quickly and safely.
Keeping thorough business records is a key to good tax planning. If you are in business and do not have an accountant as yet, get yourself a good certified accountant (a CPA or an ACCA) to help you with this.
He can set up the books and records and provide you with a roadmap of potential red-flag tax issues concerning your business.
He or she should also be able to advise you on your tax obligations, assist you with preparing your tax returns, monitor your business charges, and suggest tax strategies to minimise your tax costs.
Paul Frobisher Mugambwa, manager in PwC Rwanda Tax Services