What is tax deferral
Tax deferral is the process by which individuals and companies are able to postpone paying their taxes to a future period in time. Many individuals and companies are able to defer paying their taxes, given that they are in compliance with the jurisdictional regulations in regards to paying their tax.
For more information on tax payments or to obtain effective tax planning to meet your personal and business needs, please Contact DeltaQuest.
Tax deferral explained
Tax planning is a method of strategizing the amount of tax an individual or company is entitled to pay to the government. One of the methods by which many professionals and business entities are able to pay a lesser amount of tax is through deferring tax. Tax deferral is a tax planning strategy that allows them to delay the payment of their taxes to a future point in time.
This type of tax planning is increasingly popular amongst multinational corporate firms as it enables them to invest a substantial amount of capital in large investments, which they are able to pay off over a certain time period through accelerated depreciation. It is often the case that these companies are able to defer paying tax on their investment to an infinite time therefore completely writing it off their company’s total investments, therefore not paying tax.
In the case that a company is offshore, the business entity is only liable to pay tax in the jurisdiction in which they operate; deferring the amount of tax they pay in their country of domicile. This is one of the main reasons why companies go offshore as they are able to pay a much lower rate of tax or sometimes no corporate tax, depending on the jurisdiction they choose to operate in. In some countries, companies that operate offshore are allowed to defer paying tax on their offshore profits to an infinite point in time thus reducing the amount of tax they pay in a tax year.
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