While managing my company I get weekly profit. But I pay 40% income tax therefore I remain with only 60% of money earned. These money could be used more effectively than to pay to government:)
Is it a good strategy to develop company using bank credits and balancing near the "zero" profit level? Who has this experience? What is the optimal economical strategy in this case? ( in case of any for sure).
the system has been overhauled recently due to abuse(people used to spend most their cash before year end to get the near zero profit level). Right now it is not really worth it anymore(due to risk against gain).
thanks
As Aoitsuki said, most of the tax loopholes have been fixed, there is not really any way to create artificial expenses to reduce your tax bill.
The only thing I can think of doing is running some route marketing (which on it's own can be a questionable proposition). You can spend money now, let's say for 3 months, and you have an expense for these 3 months, but your RI may reach 100 (full potential) 3 months earlier.
But it really comes down to economic sense, not tax planning (which is a good thing). Meaning, money spent on marketing vs. increase LFs earlier, rather than later. It generally makes more sense on LH routes than on SH routes.
Quote from: Ligo on May 01, 2015, 05:26:23 PMand balancing near the "zero" profit level?
So you want to stop making profits because you have to give a share of the profits to the government that provides the infrastructure you are operating with? Seriously? Just maximize your profit, that way you also maximize after tax profit.
Quote from: Infinity on May 02, 2015, 09:11:25 AM
So you want to stop making profits because you have to give a share of the profits to the government that provides the infrastructure you are operating with? Seriously? Just maximize your profit, that way you also maximize after tax profit.
It depends on country:) In some countries it is better not to pay to governent because Your tax payment will be used not for infrastructure (roads, medicine, retirement etc.) but by unknown people for a new castle purchaising somewhere in France:)
QuoteIs it a good strategy to develop company using bank credits and balancing near the "zero" profit level?
I think the OP is asking if it is a good idea to maximise loans in order to grow more quickly, by balancing the payments so they still give him a positive (or zero) cashflow. In that case I'd say - YES, take out the loans but ONLY if you are sure you can use the loaned money for good, stable, profitable growth. You will be taking a more risky strategy - if you make a bad decision or the economy turns bad (high fuel prices) or a competitor suddenly attacks you then you could be in trouble.
You will find that loan repayments do NOT reduce the amount of tax you have to pay. The account system is quite realistic in the way "profit" and "loss" is calculated. Simply spending money (buying aircraft or slots) does not reduce your profits as these become assets that you own.
Just be careful - borrow a little money and look at the figures closely over a few months. If you use the money wisely you should make more profit overall. And remember that it is only a game - failing a couple of times is probably the best way to learn.
Hi Lingo,
If you want to avoid TAX then you can consider opening a base in Dubai for example - 0% taxation of your profit - there are other countries too