Nowadays, tax optimization can be effective not only for large multinational companies, which mainly take advantage of differences in tax regulations of different countries, but also for small Slovak companies. To achieve savings of even tens of percent per annum on taxes or levies, in most cases, these small companies do not need any offshore company.
The Income Tax Act currently contains approximately 100,000 words, almost three times more than in 2004, when the major tax reform by Mikloš came into effect. The number of words in the law at first glance may act as insignificant statistics, but the more complicated the Income Tax Act is, the more opportunities it provides for optimization. Therefore, even a “single-member s.r.o.” can also optimize taxes, even though in general the states are increasingly closing their loop for a so-called illegitimate tax optimization.
The entrepreneur should be aware of cases of legitimate tax optimization as well as cases in which tax cuts may result to fines or even criminal prosecution. In general, we divide tax optimization into these three basic types.
Tax Optimization Types
- legitimate tax optimization
- aggressive tax optimization
- tax fraud
How to Optimize Taxes Successfully
Just as with search indexing for Google, tax optimization today must be honest, realistic and sufficiently credible to be successful. If the agency gets a temporary success by applying a new, unnatural way to improve website search, it is very likely that it is just a short-term success. For example, Google simply changes the algorithm. If today someone relies on the incapability of tax controls to analyse more complicated operations and structures, the limitation period is now in some cases up to 10 years. Therefore, if a current trend of strengthening the tools used by financial authorities continues, the taxpayer may be sanctioned several years after. Therefore, tax optimization must now be built on solid foundations to qualify as a set of legitimate tax optimizations that the state cannot penalize.
If you do cross-border business, the optimization options are expanding. Never in history has physical movement of people or goods been as simple as today. Likewise, it has never been so easy to provide services from one end of the world to a customer located at the other end of the world. Worldwide, borders are being wiped off, distance becomes relative, and more business opportunities become more real. The open world thus offers opportunities to benefit from the tax advantages of individual countries in order to optimize taxes, finance and profit. However, international tax laws and regulations are constantly changing, with increasing globalization making the taxation of both cross-border and domestic operations more complicated. A detailed knowledge of these regulations allows our clients to design and implement efficient and effective tax structures that meet current regulatory requirements.