Paying Taxes time!

Ok, this topic is going to discuss the way to reduce your taxes payment but only for company owners. If you started your own business, this can give you a small insight into the process, and how can it be manipulated. When it comes to taxes, it’s important to remember that you pay a certain percent of tax from the profit, and not from the income. I will give you an example so you will understand better:

Let’s assume that our company is selling dough-nuts. In total, this months, there were 1000 doughnuts sold, each of them costed 1$. (Yea, pricy dough nuts, no idea how they got sold! :) ) This means, current month’s income was 1000$, right? This was the income, not pure profit, as we spent 200$ on ingredients for the baking and 250$ on the human power. Hence our balance is as follows:

  • Investments – 450$
  • Income (brutto) – 1000$
  • Pure profit (netto) – 550$.

When the time will come to pay the taxes, say 19%, the percentage will only apply to the 550$ (profit). After doing a lot of checking with a big help from my attorney’s side, I came to realize that there is no legal way to reduce the taxes, however, there is a very easy (artificial, of course) way to increase the ‘investments’. At the case above we only calculated the ingredients and baker’s salary. How about the electricity bill? How about the water bill? If the company and your residence are located at same address, you can easily add your bills to the company’s bills balance, because no one can actually check if you wash your hands in the “office” on the first floor, or at the attics near your bedroom.

Just look at your company and look at your domestic needs – what other bills or purchases will smoothly merge in the company’s investments? Get a receipt for everything you purchase, if you feel that your profits are raising too high and it can “cost” you in big taxes.

Remember to stay reasonable! Don’t add shampoo receipts, unless you are running a beauty / haircuts salon. Don’t add obvious items of private use such as CD’s and the likes. Mineral water, napkins, coffee and cleaning products, however, will easily fit in any ordinary office bill.

This way, you can buy stuff for your house and apply them towards your company’s balance. Don’t forget, that internet connection is also essential for any business. ;)



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