STRATEGIC TAX MANAGEMENT A STRATEGIC TAX MANAGEMENT COURSE

WOULD TYPICALLY COVER THE

Strategic tax management refers to the FOLLOWING TOPICS:
process of developing and implementing tax 1. CORPORATE TAX STRATEGY
strategies that align with the overall business Developing tax strategies that align
strategy of an organization. It involves with overall business objectives and
identifying tax risks and opportunities, maximize after-tax profits.
creating efficient tax structures, minimizing 2. INTERNATIONAL TAX
tax liability, and ensuring compliance with tax Understanding the tax implications of
laws and regulations. The purpose of strategic cross-border transactions, including
tax management is to optimize a company's transfer pricing, foreign tax credits,
tax position to maximize financial benefits and withholding taxes
and achieve long-term business objectives. 3. TAX COMPLIANCE
Ensuring compliance with tax laws
PURPOSE OF STRATEGIC TAX and regulations, including tax
MANAGEMENT reporting, record-keeping, and
The purpose of strategic tax management is corporate governance.
to help businesses optimize their tax position, 4. TAX TECHNOLOGY
minimize tax liability, and maximize financial The use of technology in tax
benefits within the constraints of legal and management, such as tax software,
regulatory frameworks. Strategic tax data analytics, and automation.
management can help businesses achieve 5. ETHICS IN TAXATION
the following objectives: Ethical issues related to taxation,
including tax avoidance, tax evasion,
1. MAXIMIZING AFTER-TAX PROFITS and the role of tax professionals in
- By developing tax strategies that ensuring compliance
minimize tax liability, businesses can
retain a larger portion of their profits, In addition to lectures and case
which can be reinvested in the studies, a strategic tax management course
business. may include group projects and
2. REDUCING TAX RISKS presentations, guest lectures from tax
- By identifying tax risks early, professionals, and discussions of current tax
businesses can take proactive issues and trends.
measures to mitigate those risks and
avoid potential penalties or legal OBJECTIVES AND FUNCTIONS OF
costs STRATEGIC TAX MANAGEMENT
3. ENHANCING BUSINESS VALUE
- A well-managed tax strategy can Objectives of Strategic Tax Management:
enhance a business's value by 1. Minimizing Tax Liability:
optimizing its cash flow and reducing The primary objective of strategic tax
the risk of unexpected tax liabilities management is to minimize the tax
4. ACHIEVING COMPLIANCE liability of the organization. It involves
- Strategic tax management helps identifying legal tax exemptions,
businesses meet their tax obligations deductions, credits and structuring
by complying with tax laws, transactions in a tax-efficient manner.
regulations, and reporting 2. Maximizing Tax Planning
requirements. Opportunities:
5. FLEXIBLE PLANNING Another objective of strategic tax
- A dynamic tax management strategy management is to maximize tax
can help businesses adjust their tax planning opportunities. It involves
planning as their business objectives taking advantage of new tax laws, tax
and external tax regulations change treaties and other provisions
introduced by the government.
3. Complying with Tax Laws:
Strategic tax management helps in
 complying with relevant tax laws and acquire such assets, and it takes transactions
avoiding penalties and fines. to convert such assets into cash flow.
4. Maintaining Good Relationship with
Tax Authorities: Managers do things like buy, sell, rent, lease,
Strategic tax management helps in and recapitalize. If managers structure
maintaining a good relationship with transactions such that each is
tax authorities by demonstrating that value-maximizing, then by year-end the sum
the organization is following all tax of such transactions will have maximized firm
laws and regulations value. However, note that each transaction
has an uninvited third party: the
Functions of Strategic Tax Management: government. In strategic tax management,
1. Tax Planning: when a firm chooses transactions, it keeps tax
Strategic tax management involves management in mind.
tax planning which is the process of
analyzing the tax consequences of The firm looks to engage in transactions that
various financial decisions. It helps in maximize end-of-period value. It can choose
making informed financial decisions from a constellation of entities or
that minimize tax liability. transactions, and the choice then is put
2. Tax Compliance: through the lens of the firm’s strategic
Strategic tax management includes objectives. If the transaction (including tax
tax compliance that involves meeting effects) is consistent with the firm’s strategic
tax obligations as required by the objectives, it may accept the transaction.
relevant authorities. It includes
preparing and filing tax returns on Similarly, the tax aspects of the transaction
time and in the correct format. can be managed in a strategic manner. Next,
3. Tax Risk Management: the firm anticipates its future tax status and
Strategic tax management involves chooses the timing—this year or a future
identifying and managing tax risks. year— of the transaction. As explained
Organizations need to ensure that previously, SAVANT is an acronym for strategy,
their tax positions are defensible and anticipation, value-adding, negotiating, and
well-supported in the event of an transforming. For a transaction to be properly
audit. tax managed (and thus best increase firm
4. Tax Accounting: value), managers should consider all of these
Strategic tax management includes aspects.
maintaining proper tax accounting
records, including tax accruals and STRATEGY
deferred tax assets and liabilities. A key ingredient of any successful
5. Tax Controversy Management: organization is a sound and successfully
Strategic tax management involves implemented strategy. Tax management
managing tax controversies with the should work to enhance the firm’s strategy
tax authorities. This includes and should not cause the firm to engage in
negotiating with tax authorities to tax-minimizing transactions that deter it from
resolve disputes and responding to its strategic plan. As an extreme example, a
audit inquiries and assessments. firm could earn zero profits and pay no taxes,
but this would be inconsistent with sound
strategy.
SAVANT
THE FIRM’S BUSINESS-LEVEL STRATEGY IS
To increase firm value, managers engage in TYPICALLY DETAILED IN
transactions. Of course, firm value can OPERATIONS-LEVEL, CORPORATE-LEVEL,
increase for other reasons. AND INTERNATIONAL-LEVEL STRATEGIES.
For example, the value of the firm’s assets
simply can appreciate due to market factors
beyond the control of managers. However,
transactions must have occurred when firms
 reaction has supply-and-demand effects in
some markets, causing a price change. Tax
cuts cause prices to rise, and tax increases
cause prices to fall. (In this way, changes in
market prices can mute the effects of tax
policy.) This price effect has become known as
implicit taxes.

VALUE ADDING
Effective tax management is no different
from any other aspect of management
insofar as any transaction should at some
point be expected to add value. Ultimately,
most measures of value- adding are derived
from the firm’s financial statements. Related
to accounting earnings are the firm’s cash
flows. If the net present value of cash flows
from a transaction is positive, then, over time,
this will translate into positive financial
earnings.
ANTICIPATION
Firms operate in a dynamic environment in Using Cash Flows to Measure Value-Adding
which they must attempt to anticipate the
actions of their competitors, markets, and The key thing to remember is that if
governments. Tax-managing firms adjust the managers maximize after-tax cash flows on
timing of transactions in anticipation of each transaction, this may also maximize
expected tax changes. Firms adjust the shareholder value, as measured by financial
timing of their transactions when they are income. Therefore, discounted cash flow
certain of their future tax status or when (DCF) analysis is critical in measuring whether
there is a known change in tax rules. For a tax management method will increase firm
example, they might know that they have an value.
NOL this year, which will be used next year.
Value-Adding, Cash Flows, and Time Value
Certain Tax Changes
A tenet of business is that a peso of income
Suppose it is known that tax rates will rise now is worth more than a peso later. Holding
substantially next January. If it is now tax rates and bases constant, tax
December, the rate change can be management implies deferring income and
anticipated. Assuming it is not otherwise accelerating deductions. More formally, it is
harmful, simply delaying December expenses the net present value (NPV) of expected taxes
until January means they will have more which managers should work to minimize.
“bang for the buck” that month by being This implies that not only cash flows, but also
deducted at a higher tax rate. discounted cash flows, should be used in
determining whether a transaction increases
Uncertain Tax Changes after-tax firm value.
The tax-managed firm can anticipate tax
changes before they become official.
Employing this anticipation strategy entails
assigning a probability to the likelihood of tax Using Other Measures of Value-Adding
legislation being enacted.
The previous discussion is not meant to imply
Price Effects that DCF is the only method of value increase.
Competitors can also react to expected tax On a year-by-year basis, investors and
changes. At a minimum, a widespread creditors monitor the firm’s financial
performance. Because DCF information
(especially on individual projects) is rarely
communicated directly to outsiders, they
usually must rely on measures of
performance that can be constructed from
publicly available financial statement data. TRANSFORMING
Managers thus need to know how Tax management also includes transforming
transactions affect such measures. certain types of income into gains, certain
types of expenses into losses, and certain
Maximizing Value-Adding and Potential types of taxable income into nontaxable
Conflicts income. Regarding the latter, losses on sales
of capital assets (raw land, financial
Maintaining (or improving) value-adding is instruments) are deductible only to the extent
implicitly a contract between the manager that the firm has capital gains. Thus, the firm
and the firm’s shareholders. Closely related would like to transform capital losses to
are explicit contracts based on financial ordinary losses. In general, tax management
accounting information. The company may seeks these transformations:
have debt covenants tied to certain financial
ratios. Therefore, a transaction, while saving
taxes, might be detrimental overall if it results
in financial rations that violate these
covenants.

Value-Adding and Transaction Costs

One significant example of gain
Tax management requires that the tax
transformation is the sale of stock. If the
savings exceed the related execution costs in
corporation sells appreciated assets and then
any transaction. Transaction costs might
distributes the proceeds to shareholders, the
include brokers’ fees or legal and accounting
corporation pays taxes on the gain, and the
costs. Some examples of transactions costs
shareholders have income subject to final tax
are:
on the dividend. Instead, if the corporation
● Stock broker fees on the sale of stock
liquidates, the appreciation is taxed to the
● Attorney, accountant, and
corporation, but the subsequent distribution
investment banker charges on
to the shareholders likely is taxed to them as
mergers, acquisitions, and
capital gains. If the shareholder is an
recapitalizations
individual (as opposed to a corporate parent),
● Lobbying costs to obtain favorable
the maximum tax rate on the gain is 35%. This
tax structures prior to locating a new
transformation method may save the
plant
shareholder a significant amount of taxes.
● Temporary loss of funds when paying
an expense in December instead of
January

NEGOTIATING
Effective tax planning involves negotiating tax
benefits, both with tax authorities and with
other entities involved with the firm in a
taxable transaction. Negotiation with a
nongovernmental party to a transaction is a
function of the relative tax status of the
parties. That is, the benefits or costs can be
shifted between the parties by negotiating
the purchase price.
People also ask What is the purpose of the tax strategy?

What is strategic tax management? The Tax Strategy will provide a vision for the
tax function by defining tax governance, the
Strategically managing tax involves financial management of tax risk and tax operations
analysis and decision-making while across your business. You can work with us to
proactively controlling your organization’s tax develop a Board-approved Tax
position so that legal requirements are met.
What is the meaning of tax strategy?
How can the SAVANT framework be used to
manage taxes? One way to consider tax strategy would be as
a more holistic and strategic approach to tax
The SAVANT framework can be used to planning. It involves considering your
manage taxes by providing a method for tax long-term objectives and incorporating
planning and decision-making [1]. It allows various financial considerations, such as
companies to analyze their tax compliance business structure, investment planning, and
and develop strategies based on the SAVANT estate planning, to minimize taxes over time.
approach, such as implementing tax planning Strategy that provides the 'vision' for your
strategies for specific tax articles [1]. By using current and future operations.
this framework, companies can anticipate,
negotiate, and transform their expenses, Tax season is here again, and whether you're
leading to more efficient tax management just starting out or an experienced taxpayer,
and the avoidance of potential tax sanctions understanding the basics of taxation and
[1]. The analysis of tax planning using the effective tax planning strategies is essential.
SAVANT method can also provide added By doing so, you can optimize your financial
value to the company [1]. Overall, the SAVANT situation while ensuring compliance with
framework serves as a basis for tax decisions, legal obligations. Let's dive into some
helping companies maintain the efficiency of essential tax questions and facts.
their tax expenses and fulfill their tax
obligations [1]. What are the basics of paying taxes?

How important is tax planning as a Paying taxes is a fundamental civic duty that
company strategy? supports various government functions and
services. Individuals are typically required to
Tax planning is a critical aspect of running a pay taxes on their income, including wages,
successful business. Effective tax planning salaries, interest, dividends, and other sources
strategies can help businesses optimize their of earnings. The tax amount owed is
financial resources, reduce tax liability, and determined by applying the applicable tax
ultimately improve their bottom line rates to the individual's taxable income after
accounting for deductions, credits, and
Why do managers need to know the exemptions. Tax payments are often made
principles of tax planning? through withholding from paychecks or
quarterly estimated tax payments for
Managers need to learn about taxes because self-employed individuals.
optimizing a ven- ture's total tax burden is
important to its success, and managers are How do I do my taxes as a beginner?
the main decision makers in an organization.
Knowing the funda- mentals of taxation and For beginners, navigating the tax filing
how to apply them allows managers to make process can seem daunting. However, there
better decisions and thus be more effective in are resources and tools available to help
their jobs simplify the process. One option is to use tax
preparation software, which guides users
through the necessary steps and calculations.
Individuals can also seek assistance from tax
professionals who provide personalized
advice and ensure compliance with tax laws. interest, property taxes, charitable
It's essential to gather all relevant financial contributions, and certain medical expenses.
documents, such as W-2s, 1099s, and receipts
for deductions, before starting the tax Credits: Provide a dollar-for-dollar reduction in
preparation process. the amount of taxes owed. Tax credits can be
either refundable or non-refundable and may
What are the different types of taxes? be available for various purposes, such as
education expenses, childcare costs, and
Various types of taxes, includes the following: renewable energy investments.

Income Tax: Taxes imposed on individuals When are tax filing deadlines?
and businesses based on their earnings.
Income tax rates vary depending on the The deadline for filing federal income tax
taxpayer's filing status and taxable income. returns for individuals is typically April 15th of
each year. However, the deadline may be
Payroll Tax: Taxes withheld from employees' extended to the next business day if April 15th
paychecks to fund Social Security and falls on a weekend or holiday. Businesses may
Medicare programs. Employers also have different tax filing deadlines depending
contribute payroll taxes on behalf of their on their entity type and fiscal year-end.
employees.
What are tax withholding and estimated
Capital Gains Tax: Taxes levied on the profit payments?
from the sale of assets such as stocks, real
estate, or other investments held for more Employers withhold federal income taxes
than one year. from employees' paychecks based on the
information provided on Form W-4.
Sales Tax: State and local governments may Additionally, self-employed individuals and
impose sales taxes on the purchase of goods businesses may need to make estimated tax
and services. payments throughout the year to avoid
underpayment penalties.
Property Tax: Taxes assessed on the value of
real estate and other property owned by What tax forms and documentation do I
individuals and businesses. need?

Estate Tax: Taxes imposed on the transfer of Taxpayers must use appropriate tax forms to
assets upon an individual's death, typically on report their income and claim deductions
estates exceeding a certain threshold. and credits. Commonly used forms include
Form 1040 for individual income tax returns,
What are tax filing requirements? Form 1065 for partnership tax returns, and
Form 1120 for corporate tax returns. Taxpayers
Individuals and businesses must file tax should also maintain accurate records and
returns with the Internal Revenue Service documentation to support their income,
(IRS) to report their income and calculate deductions, and credits claimed on their tax
their tax liability. The filing requirements returns.
depend on factors such as income level, filing
status, and types of income earned. What is tax planning?

What are tax deductions and credits? Tax planning involves analyzing your financial
situation to ensure you pay the least amount
Taxpayers can reduce their taxable income by of taxes as possible. It’s not about evading
claiming deductions and credits: taxes but strategically utilizing available
deductions, credits, and exemptions to your
Deductions: Allow taxpayers to subtract advantage.
certain expenses from their taxable income,
potentially lowering their tax liability.
Standard deductions include mortgage
What is a tax strategy? mortgage interest, and medical expenses,
can reduce taxable income and lower tax
One way to consider tax strategy would be as liability. Itemizing deductions allows
a more holistic and strategic approach to tax taxpayers to claim eligible expenses that
planning. It involves considering your exceed the standard deduction amount.
long-term objectives and incorporating
various financial considerations, such as Tax-efficient investments: Investing in
business structure, investment planning, and tax-advantaged accounts, such as retirement
estate planning, to minimize taxes over time. plans (e.g., 401(k), IRA) and health savings
accounts (HSA), can provide tax benefits, such
Tax savings strategies as tax-deferred growth or tax-free
withdrawals. Additionally, utilizing
Maximize your retirement contributions: tax-efficient investment strategies, such as
Contributing to retirement accounts such as long-term capital gains and qualified
401(k)s, IRAs, or HSAs can lower your taxable dividends, can minimize the tax impact on
income while building your nest egg for the investment returns.
future.
How to lower your taxable income
Take advantage of tax credits: Explore tax
credits like the Earned Income Tax Credit Lowering your taxable income is a key
(EITC), Child Tax Credit, or education credits to strategy in reducing your overall tax burden
reduce your tax bill dollar-for-dollar. and keeping more money in your pocket.
Here are some effective ways to save on taxes:
Utilize deductions: Deductible expenses such
as mortgage interest, charitable donations, Contribute to retirement accounts:
and medical expenses can significantly lower Maximize contributions to tax-advantaged
your taxable income. retirement accounts such as 401(k)s, IRAs, or
HSAs. These contributions are typically
Employ Flexible Spending Accounts (FSAs): tax-deductible, reducing your taxable income
FSAs allow you to set aside pre-tax dollars for for the year.
medical or dependent care expenses,
providing immediate tax savings. Utilize Health Savings Accounts (HSAs): If
you have a high-deductible health insurance
Harvest investment losses: Offset capital plan, consider contributing to an HSA.
gains by selling losing investments, known as Contributions are tax-deductible, and
tax-loss harvesting, to minimize your overall withdrawals for qualified medical expenses
tax liability. are tax-free.

What are three basic tax planning Take advantage of Flexible Spending
strategies? Accounts (FSAs): FSAs allow you to set aside
pre-tax dollars for eligible medical or
Tax planning involves taking proactive steps dependent care expenses, reducing your
to minimize tax liability while maximizing taxable income.
savings. Three fundamental tax planning
strategies include: Explore tax credits: Look into tax credits such
as the Earned Income Tax Credit (EITC), Child
Income deferral: Delaying the receipt of Tax Credit, or education credits. Unlike
income to a later tax year can lower current deductions, tax credits directly reduce your
tax liability. This strategy is often used by tax bill dollar-for-dollar.
individuals who expect to be in a lower tax
bracket in the future or anticipate changes in Itemize deductions: If your itemized
tax laws that could reduce tax rates. deductions exceed the standard deduction,
consider itemizing deductions such as
Deduction maximization: Maximizing mortgage interest, property taxes, charitable
deductions, such as charitable contributions,
donations, and medical expenses to lower Adjust withholding allowances on Form W-4
your taxable income. to increase tax withholding from paychecks.

Harvest investment losses: Offset capital Claim tax credits, such as the Earned Income
gains by selling losing investments, a strategy Tax Credit (EITC) or Child Tax Credit, for which
known as tax-loss harvesting. Capital losses they qualify.
can be used to reduce taxable income by up
to $3,000 per year ($1,500 if married filing Maximize deductions by keeping track of
separately), with any excess losses carried eligible expenses and itemizing deductions
forward to future years. when beneficial.

Defer income: If possible, defer receiving Contribute to tax-advantaged accounts, such

income to the following year. By postponing as retirement plans and health savings
income, you can reduce your taxable income accounts, to lower taxable income.
for the current year and potentially benefit
from lower tax rates in the future.

Maximize educator expenses: If you're an tax planning is a critical aspect of running a

eligible educator, take advantage of the successful business. Effective tax planning
educator expense deduction for strategies can help businesses optimize their
out-of-pocket classroom expenses, such as financial resources, reduce tax liability, and
books, supplies, and professional ultimately improve their bottom line
development courses.
What is an example of tax avoidance?
Contribute to health insurance premiums: If
you're self-employed, consider deducting Tax Avoidance vs Tax Evasion | Tax Evasion
health insurance premiums paid for yourself, Consequences ...
your spouse, and your dependents. This
deduction can lower your taxable income. Examples of tax avoidance schemes include
advance deeds, loan payments, grants, tax
Consider tax-efficient investments: Invest in deductions, credits, or exemptions that are
tax-efficient vehicles such as municipal bonds legally available to reduce tax liability.Apr 23,
or index funds, which may generate lower 2024
taxable income compared to other
investments. What are the variables in tax planning?

How can I get a bigger tax refund? Tax planning methods involve four key
variables: The entity variable, the time period
While receiving a tax refund may provide a variable, the jurisdiction variable and the
financial boost, it's important to note that a character variable.
large refund indicates overpayment of taxes
throughout the year — essentially funds What is the greatest purpose of taxation?
you’ve loaned to the government,
interest-free. Your goal shouldn’t necessarily Taxation Defined, With Justifications and
be to get a bigger tax refund, but to pay as Types of Taxes
close to the amount of taxes you owe as
possible. The most basic function of taxation is to fund
government expenditures. Varying
Still looking to get a bigger tax refund? Here justifications and explanations for taxes have
are a few ways you can increase the likelihood been offered throughout history. Early taxes
of a bigger tax refund: were used to support the ruling classes, raise
armies, and build defenses

What is the goal of tax planning is to

minimize taxes?
Tax planning considers the tax implications of including public works and services such as
individual, investment, or business decisions, roads and schools, or programs such as Social
usually with the goal of minimizing tax Security and Medicare.
liability. While decisions are rarely made solely
on their tax impact, you should have a What is a tax aware strategy?
working knowledge of the income or estate
tax issues and costs involved. Tax-aware investment management is the
practice of considering a client's tax liabilities
What are the four main purpose of throughout the portfolio construction and
taxation? management process to proactively
maximize their after-tax returns. This type of
The four “Rs” of tax refer to the key benefits management becomes more important as an
that flow from taxation: Revenue, to fund investors' tax bracket increases.
public services, infrastructure and
administration. Redistribution, to curb Why is tax important to a company?
inequalities between individuals and between
groups. Repricing, to limit public “bads” such Importance of Tax to Businesses
as tobacco consumption and carbon
emissions. The concept of taxation is also important to
businesses because governments can fund
he four “Rs” of tax refer to the key benefits this money back into the economy in the
that flow from taxation: form of loans or other funding forms. Taxes
help raise the standard of living in a country.
Revenue, to fund public services,
infrastructure and administration How does effective tax management
interact with strategy?
Redistribution, to curb inequalities between
individuals and between groups Tax management should work to enhance
the firm's strategy and should not cause the
Repricing, to limit public “bads” such as firm to engage in tax-minimizing transactions
tobacco consumption and carbon emissions that deter it from its strategic plan. As an
extreme example, a firm could earn zero
Representation, to build healthier democratic profits and pay no taxes, but this would be
processes, recognising that higher reliance of inconsistent with sound strategy.
government spending on tax revenues is
strongly linked to higher quality of Why plan taxes?
governance and political representation
Tax planning helps you reduce the amount of
What is tax planning? taxes you owe by using different strategies to
make the most of deductions, credits,
Tax planning is the process of assessing your exemptions, and incentives.
financial situation and identifying measures
you can take to reduce the burden of income What is the difference between tax
tax on your finances. The primary scope of tax planning and tax avoidance?
planning is to look for opportunities to save
taxes, so your overall tax liability is reduced to What Is Tax Evasion, Tax Avoidance and Tax
the maximum extent possible. Planning | HDFC Life

What is the best explanation of taxes? Objective: The objective of Tax avoidance is to
reduce tax liability by applying the script of
Taxes Definition: Types, Who Pays, and Why law whereas Tax evasion is done to reduce tax
liability by exercising unfair means. Tax
Taxes are mandatory contributions levied on planning is done to reduce the liability of tax
individuals or corporations by a government by applying the provision and moral of law
entity—whether local, regional, or national.
Tax revenues finance government activities,
What is the penalty for tax evasion in the Taxation is the practice of collecting taxes
Philippines? (money) from citizens based on their earnings
and property. The money raised from taxation
Penalties and Fines for Tax Evasion in the supports the government and allows it to
Philippines ... fund police and courts, have a military, build
and maintain roads, along with many other
If proven guilty of tax evasion, fines can range services.
from Php 500,000 to Php 10,000,000. On top
of that, you cWhat is the morality behind Why do we need to pay taxes?
paying taxes?
The money you pay in taxes goes to many
Taxation is considered moral because it is places. In addition to paying the salaries of
seen as overall beneficial for all of society, and government workers, your tax dollars also
because we have agreed to taxation through help to support common resources, such as
the laws and political representatives we vote police and firefighters. Tax money helps to
for.an also be imprisoned for no less than six ensure the roads you travel on are safe and
(6) years but no more than ten (10) years well-maintained. Taxes fund public libraries
and parks.
Are VAT and sales tax the same in principles?
What is the tax loss strategy?
What Is Value-Added Tax (VAT)?
Tax-loss harvesting is a strategy that uses the
A value-added tax is a flat tax levied on an capital losses from one investment to offset
item. It is similar to a sales tax in some taxes owed on capital gains (profit) from
respects, except that with a sales tax, the full another investment. It is permitted under
amount owed to the government is paid by Internal Revenue Service (IRS) rules, though
the consumer at the point of sale. With a VAT, certain conditions must be met.
portions of the tax amount are paid by
different parties to a transaction. What is the tax inclusion method?

What is tax-efficient investing? Customers pay a set fee for a product or

service. Before the transaction, tax rates are
Tax-Efficient Investments calculated. The unit price will be lower before
the tax % is applied. Tax-inclusive income tax
Among stock funds, for example, rates are commonly reported
tax-managed funds and exchange-traded
funds (ETFs) tend to be more tax-efficient How do taxes work in the Philippines?
because they trigger fewer capital gains.
Actively managed funds tend to buy and sell Income of residents in Philippines is taxed
securities often and can generate more progressively up to 32%. Resident citizens are
capital gains distributions and more taxes. taxed on all their net income derived from
sources within and without the Philippines.
What is the difference between e-VAT and For nonresident, whether an individual or not
VAT? of the Philippines, is taxable only on income
derived from sources within the Philippines.
The E-VAT law aims to generate additional
government revenue by expanding VAT
coverage, reducing some taxes, and
increasing corporate income tax rates. It shifts
the Philippine VAT from a consumption-type
to an income-type tax by restricting
immediate input tax credits for capital goods.

What is taxation in simple words?