Once the process of organizing and protecting your assets has started, various aspects will be analyzed, one of the most important being the identification of the appropriate tax strategy, seeking that the decisions that you make today, have the expected impact in the future.
As we know, compliance with tax obligations is unavoidable since sooner or later taxes will have to be paid, however, with proper tax planning we can take advantage of the benefits that the tax system offers us, which, sometimes due to lack of information or ignorance, we do not put into practice. A clear example of this is the benefit of the recognition of a real estate as Tributary Family Heritage, which was a topic developed in another of our blogs and that we invite you to read: Tributary Family Heritage and Principal Housing blog
It is worth mentioning that tax strategies do not seek to evade obligations with the treasury, on the contrary, what is sought is an optimal way to pay taxes so that the tax burden is less but always complying with the law.
In order to choose the most viable method for a specific tax strategy, it is essential to analyze each case in particular, since each family estate is different. Commonly we will find recommendations to include the use of legal vehicles such as legal entities, trusts or other jurisdictions that offer tax advantages, but it is essential that you go to an advisor specialized in this matter to carry out an exhaustive study of your assets in order to have a comprehensive vision of it and thus be able to identify the tax strategy that best suits your equity structure.
There are several factors that affect the determination of the appropriate tax strategy and one of them is undoubtedly the tax residence. This refers to the country where a person, whether natural or legal, is considered a resident for tax purposes. It is even possible to be a tax resident of several countries at the same time since the meaning of this term varies according to the internal legislation of each country and to alleviate the burden sometimes you can resort to relief methods such as the Conventions to avoid the double taxation.
Another aspect that we must not ignore is the exchange of tax information. Due to the globalized reality in which we live, internationalization in business is increasingly present and international financial organizations have also been concerned with cooperation between different jurisdictions with the aim of avoiding tax evasion and therefore loss collection. That is why a delicate analysis is required that allows visualizing all the possible tax implications when establishing the roadmap of a tax strategy within the planning of a person’s estate.
Additionally, it is undeniable the evolution of the tax systems motivated by pressure from international financial organizations that have led countries to constantly adapt their internal regulations. The tax strategy applicable within an estate planning process will be something dynamic that will adjust to these changes. For example, the country of tax residence of a person may today have a territorial tax system, that is, it only taxes income that has been generated locally (national source) and tomorrow that system may migrate to a universal one, which implies that all income obtained will be taxed regardless of where it was generated. Definitely, the impact that a change of this nature will have must be anticipated and that will force a review of the strategy that was initially proposed with the intention of optimizing tax costs.
Whichever strategy is chosen, the increasingly stringent tax compliance regulations aimed at preventing money laundering, which seek the much-desired legal security and international transparency, must be considered.
Finally, we emphasize that proper tax planning will allow you to enjoy greater effectiveness in your current or future business, a greater cash flow and an effective organization of your assets.
Head of Legal & Human Resources
For more information: