cryptohunter
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Companies can use various strategies to lower their tax liabilities through offshore tax and legal structures. Some of the most common strategies include:
- Transfer pricing: Companies can use transfer pricing to allocate profits to subsidiaries located in countries with lower tax rates. This can be done by charging high prices for goods and services that are transferred between subsidiaries in different countries, which reduces the taxable profits in high-tax countries and increases the taxable profits in low-tax countries.
- Holding companies: Companies can set up holding companies in countries with favorable tax regimes to hold their intellectual property or other assets. This can allow them to reduce their tax liabilities by earning profits through these assets without being subject to the high tax rates of their home country.
- Debt financing: Companies can use debt financing to reduce their tax liabilities by deducting the interest paid on loans from their taxable profits. This is particularly effective when the interest is paid to an offshore subsidiary or a holding company, as the interest payments may be tax-deductible in the home country, but not taxable in the country where the subsidiary or holding company is located.
- Royalties: Companies can use royalties to reduce their tax liabilities by licensing their intellectual property to offshore subsidiaries or holding companies. This allows them to earn profits from the use of their intellectual property without being subject to the high tax rates of their home country.
- Base erosion and profit shifting (BEPS): Companies can use base erosion and profit shifting (BEPS) strategies to reduce their tax liabilities by shifting profits from high-tax countries to low-tax countries. This can be done through a variety of methods, including transfer pricing, debt financing, and royalty payments.
