Tax Avoidance Structures
Tax avoidance is an issue of much debate in many developed countries throughout the world. Tax avoidance schemes are designed to make use of the legal mechanisms put in place by governments and to exploit them to indirectly reduce the tax liability of an individual or a business. There are many variations on the types of Tax Avoidance Structures that are used, but the fundamental purpose of any tax avoidance structure is to reduce taxable income and to maintain the high levels of wealth and financial health of a person or company.
The most commonly used tax avoidance structure is the trust. Trusts have the ability to shield assets from taxation. This is because trusts are separate legal entities, making it possible for the beneficiaries of the trust to avoid the taxation of their assets. As a result, the trust structure is often used by high-net-worth individuals and businesses in order to protect their assets from taxation and estate duty.
Another form of tax avoidance structure is the corporate structure. By setting up a corporation, businesses can benefit from deductions and credits that are not available to individuals. Furthermore, it allows businesses to benefit from greater liability protection, as well as the ability to defer taxes until they are ultimately returned to shareholders as dividends.
One of the most popular tax avoidance structures in recent years has been the use of offshore companies. In some cases, jurisdictions offer lower taxes to offshore companies than those offered to domestic businesses or individuals. This makes it possible for businesses to lower their tax burden and maintain higher levels of profits.
Another common tax avoidance structure used in the UK and other countries is a trust fund. With trust funds, assets can be sheltered from taxation and the returns can be enjoyed by the beneficiary without the burden of taxation. Trusts are also an excellent way for high-net-worth individuals to pass on their assets to future generations without having to worry about the taxation of these assets.
It is important to note that there are several legal considerations that must be taken into account before using any of these structures. Proper financial and legal advice should be sought in order to determine which structure is the most appropriate for an individual’s or business’s financial needs. Furthermore, some countries, including the UK, see tax avoidance as a criminal offence, and serious penalties could arise if the structures are not used correctly.
Tax avoidance structures are designed to make use of the legal and financial opportunities available to shield assets and income from taxation. Such structures can represent a useful option for businesses and individuals who wish to enjoy a higher level of financial protection from taxes. However, it is important to understand the legal considerations and to seek advice from competent professionals before using any of these tax avoidance structures.
