Managing finance during crisis: “out of the box” tax planning

During the global economic crisis you may find opportunities for strategic tax planning by thinking “outside the box”. Bellow you may find some tips on how to improve your tax planning:

Using conventional strategies – typically suggested for today’s economic crisis:

  • Efficient utilization of operating and capital losses;
  • Acceleration of deductions;
  • Deferral of income.

Alternative strategies – “out of the box” tax planning:

Efficient repatriation of earnings – distribution of dividends during a loss year:

  • Potential repatriation without incremental tax;
  • If low taxes were paid in previous years, loss in the current year would increase the effective tax on the earnings pool, allowing for a more efficient repatriation.

Corporate reorganization and restructuring:

  • Recapitalization of common shares into preferred shares;
  • Issuing new common shares for a minimum level of investment;
  • Tax liability limited to preferred share value / coupon amount.

Of course, other tax planning strategies may also be available to taxpayers depending on their particular situation. Exploring alternatives may result in better income management, a critical issue during crisis.

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