Startups in the PH: Efficient Tax Planning Strategies

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Do you have your own startup? Or are you planning to launch your own? If you already have one, for sure you know the weight that comes with being a founder. Part of running your own startup is managing your taxes. You need to stay on top of your finances and you can do that by thinking about your startup tax liability. 

Ideally, you should prepare a plan with tax services in Manila so you’re ready when it’s time for tax season. You need to prepare a laid-out tax plan to help protect your business’s financial stability and health. Business taxes can seem complex but if you understand a few basic principles, it will make a lot of difference. 

Tax Planning Strategies

It is crucial for you to create your tax plan with the help of expert tax and audit services in the Philippines. Their expertise will help you stay tax compliant, avoid tax audits and fines, as well as minimize your annual taxes. 

Select the Right Business Structure

The business structure you choose will depend on the type of your business and the tax bracket you belong to. If your business is a C corporation, your income tax rate will somewhere be around between 10% to 37%. For S corporations, LLCs, and sole proprietorships, the tax rate of your business will be determined by your own personal tax rate. For partnerships, the owners will pay their own share of business income taxes.

Each business structure has its own tax benefits. If your startup is a large company and is often exposed to financial risks, the right structure for you would be a corporation. A corporation is given personal liability protection from business debts or bankruptcy. If you are starting your business alone, it is best to choose the sole proprietorship business structure.

Claim Your Tax Deductions and Credits

You need to maximize your tax deductions and credits to reduce your overall total taxable income. Doing this will help you have a more substantial income tax return. If you are a sole proprietor, make sure you keep up with the deductions and tax credits to lower the tax you pay every quarter. 

Tax-Advantaged Accounts

If you open one or more tax-advantaged accounts, you can reduce your overall tax liability each year. Take your retirement contributions as an example. Your contributions to a specific plan like the PERA are tax-deferred which means you don’t have to pay taxes until you withdraw your money from your account. Another account you can open is a Health Savings account. It will protect your contributions from being taxed as long as your money only goes to medical bills that are qualified. There are also several education plans and insurance plans that are tax-free with certain stipulations that you can try checking out. 

Depreciation and Amortization

You can leverage your depreciation and amortization to get more tax deductions and credits. For example, if you have a capital expense of buying 10 cars for 5 Million Pesos, and expect those vehicles to depreciate by half over 5 years, you can deduct PHP 50,000 every year in depreciation until you can recover from the losses of your business. According to accounting services in the Philippines, it is the same way for amortization except it is exclusively for intangible assets like IP rights, copyrights, and/or trademarks.

Implement Employee Benefits

Strategize and implement various benefits for your employees. This is so that your employees are motivated and eager to do their job right. It can improve their morale and retention. There are also many employee benefits that are tax deductible.

Monitor Your Tax Obligations 

Before you launch your startup or if you already have one, ensure that you are already familiar with the tax laws and implications for the type of business that you have. 

Maximize Your Tax Planning Strategies With A Professional Service

You need to have a good understanding of the taxes that will apply to your business for you to maintain your profit. The tax strategies mentioned above will help you control your business’s tax burden and help your business grow more profit. Taxes in general can be complex so working with experienced professionals like our accounting services in Pasig can help you understand the complexity as well as help keep your finances in order. If you need help, don’t hesitate to reach out to us.