Use Tax Strategy To Improve Cash Flow

　　 Corporate income tax

Tax accounting considers the use of accelerated depreciation method to obtain more pre tax deductions, and the fixed assets that can be accelerated depreciation include: 1) fixed assets that are updated rapidly due to technological progress; 2) fixed assets which are in strong vibration and high corrosion all the year round. Enterprises can shorten the depreciation period by 40% by using the double declining balance method or the total number of years to accelerate depreciation.

The existing classifications of advertising fees and business publicity fees are reviewed, and advertising expenses exceeding 15% limit are excluded, so that the cost of pre tax deductions is minimized.

Review whether shareholder loans can be restructured into third party secured loans or entrusted loans, thereby avoiding the deduction of interest costs due to capital weakening rules.

When tax refund and tax credit are used to purchase equipment, considering whether the equipment is suitable for environmental protection, energy saving, water saving and safe production, the special equipment that meets the above requirements can be applied to the tax payable in accordance with the 10% of the equipment cost in the year of the enterprise. If the credit is insufficient, the credit can be credited in the next five tax years.

Reviewing the collection of R & D costs enables the development of new technologies, new products and new processes, and allows the maximum R & D cost of 50% additional deductions.

To check whether the enterprise meets the requirements of software enterprises, integrated circuit enterprises, high-tech enterprises, and so on, so as to ensure that enterprises enjoy all possible tax preferences. If a software company or integrated circuit enterprise increases the retained earnings to the registered capital or sets up a new software enterprise or integrated circuit enterprise in the western region, it may apply for a refund of 40% to 80% of the reinvestment amount.

Good accounting management reviews the quarterly financial data and minimized the income tax paid in advance of the quarterly income tax. Careful arrangement and strict supervision of enterprise tax administration and declaration system, so as to avoid a waste of cash fines, fines for enterprises are unnecessary expenses, and can not be deducted before tax. Review internal risk control related to tax matters, avoid or reduce errors in tax declaration as far as possible.

The group problem can be assessed if the income can be transferred from the profitable business unit in the group to the loss making business unit, thereby reducing the effective tax rate of the group. The method includes: providing services from the loss making enterprises to the profitable enterprises or jointly using the same service center; selling the added value intangible assets to the profit making unit or the high tax rate unit by the loss unit or the low tax unit; and merging the company within the group. To discuss and consult with local governments to get financial subsidies from local governments for the establishment of large group companies or regional headquarters in the region.

Income deferred review of business contracts and business models, reasonable planning of deferred gains or losses occurred in order to achieve the purpose of deferred tax payment. Under the new income tax law, the transitional tax rate will gradually shift from preferential tax rates (such as 7.5%, 10% or 15%) to 25%. Enterprises in the transitional period of tax preference should carefully analyze and plan profits or losses.

　　 Indirect tax

VAT efficiency increases the value of VAT in all links in the supply chain, and in theory, the value added tax paid in the last link can be deducted from the tax amount in the next link. Detailed analysis of the VAT process in every link of the supply chain reveals that the cost of VAT can not be recovered in every link and is properly planned.

Due to frequent changes in laws and regulations in China, enterprises need to have sound compliance procedures to carry out correct and effective management so as to ensure the accuracy of tax returns (some multinational companies also need to ensure compliance procedures comply with the relevant provisions of the 404 clause of the Sarbanes act). The value-added tax reform currently being carried out in China has created opportunities for enterprises to increase the efficiency of VAT. Enterprises may consider extending the purchase and renewal plan of fixed assets until January 1, 2009.

The export tax rebates for value-added tax can be used to reduce the cost of export tax rebate by adopting different trade patterns (such as processing trade mode) in view of the difference between the commercial operation mode and the supply chain structure. The export tax rebate rate is determined by the customs code. Therefore, export enterprises can properly explore the feasibility of re classification of customs codes (at the same time keep the basic description of products correctly), so as to enjoy a higher export tax rebate rate.

Export enterprises need to pay close attention to the frequent changes in China's export tax rebate rate in recent months, so as to fully enjoy the benefits brought by the tax rebate rate increase.

In order to ensure the effective and reasonable management of indirect tax and the orderly management process, best practices can use a set of technical solutions to manage their compliance work, and provide a platform for management to fully understand the overall indirect tax situation of enterprises.

The technical solution can systematically and quickly examine all aspects of enterprise operation from the overall level, thereby identifying tax risks and finding opportunities for planning - "health check". "Health inspection" can help enterprises to examine their business and tax status effectively, so that management can consider and decide on the risks and potential opportunities that enterprises need to further assess.

Tariffs assess and plan the prices of imported goods, explore the import of goods at lower prices, calculate and pay the import duties and VAT opportunities, while maintaining the rationality of related party transactions. To re examine the customs codes of existing commodities, we explore the possibility of reclassifying customs codes from another angle / viewpoint to apply a better tariff rate.

We should give full consideration to and take advantage of preferential policies (such as 10 measures recently announced by the Customs for processing trade enterprises, the use of bonded tools and special areas, and export processing trade reduction (Exemption) tax, etc.). In addition, the free trade agreement usually allows a lower tariff rate. Therefore, enterprises can examine, excavate and plan the origin of products, and apply more favorable tariff rates. Improving the management of tariff compliance can effectively avoid unnecessary cash drain. The issue of tariff compliance usually leads to delayed declaration, payment of deposits, and even lead to late fees, extra taxes and fines. At present, many Chinese enterprises have not yet realized that due to the irregularities of operation, enterprises themselves have already undertaken unnecessary costs.

At present, business tax planning only requires payment of business tax within the territory of China. Therefore, enterprises may consider transferring labor to outside China without paying business tax in China. In addition, as part of the value-added tax reform, business tax has also been levied and changed accordingly (since January 1, 2009). Enterprises should pay close attention to the legislative reform of business tax.

Since business tax can not be deducted, enterprises should make full use of preferential tax policies in specific industries, such as technological innovation industries, and calculate and pay business tax on a smaller taxable basis.