Case for partner ship A taxpayer is partner in corporation own 40% of capital and has monthly salary 2500 NIS for managing, he is married and has three.
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Presentation on theme: "Case for partner ship A taxpayer is partner in corporation own 40% of capital and has monthly salary 2500 NIS for managing, he is married and has three."— Presentation transcript:
1 Case for partner shipA taxpayer is partner in corporation own 40% of capital and has monthly salary 2500 NIS for managing, he is married and has three sons one of them study in the university with certificate and others are school age.The taxpayer lives with his father and mother and take care of them, he lives in a rent house 500 NIS monthly.The operation result for the corporation as follow: gains and expensesDollar = 4 NISDrCrPurchase250000Sales525000Begging inventory125000Ending inventory60000Sales expenses17500Managerial expenses7500Salary for partners 50%Furniture depreciationRent
2 Sales 525000 Cost of goods sold 315000 Gross income 210000 Deductions Purchases250000Begging inventory125000Ending inventory60000Gross income210000Deductions102500Managerial expense7500Sales expense17500Furniture depreciation10000RentSalary for two partnersNet revenue107500Total revenue for partner107500*40% = 43000Total income for taxpayersalary (2500*12)= 73000
3 Annual income 73000/4= 18250$ Exemptions 9500$ Taxable income 8750 Resident3000$Wife500$Son *21000$University student2500$Father and motherRent house 500*12/41500$Taxable income8750Paid income tax8750*8% =700$
4 Assume the given information for sharing company ! What is the main difference?The same situation without exemptionsTotal revenue /4 = 26875$26875*15% =4031 income taxNet income after income tax= =22844$ *40% share for the partner =9137$
5 Administrative appeals A taxpayer who does not agree with the agent's (tax officer) report may request a meeting with agent administrative tax office within 30 days by written message, or he will lose the opportunity to do the appeal.The administrative appeal process allows taxpayers one additional opportunity to reach settlement before resorting to the courts.Note that both taxpayer and tax officer do not want reach the litigation. ! Why?Taxpayer do not pay tax amount according to the law, and he want to pay the lowest tax payment, he is very weak because of not holding regular documents.Tax officer want to reach for arrangement point (adjustment) to pay the tax payment (sensible to tax officer) because the litigation will take a long time (one year at least) and that will inhibit providing the public treasury for the ministry of finance.
6 Tax planning and strategy Important note:Since the year 1967 tell now we have no litigation case for income tax !!!But for VAT and CUSTOMS we have several cases.Tax evasionTax avoidanceTax planning and strategyWhat is the main difference between them?Tax evasion is illegal work and that stands by offering wrong information and phoney documents to pay less payment of the accrued tax.That will cause criminal liability to tax payer.Tax avoidance is legal work by following the procedures of income tax law and get the best and largest of deductions and exemptions by searching for the way that make the tax payment very little.it is important to say that tax avoidance is accepted by the tax officer to inhibit illegal tax evasion.
7 Tax planning and strategy To reach the tax avoidance which is legal operation, every taxpayer must think about the way and the most suitable condition for the project typeTrading or service or industrial project , …..Every type has different key way for making the best legal tax avoidance.Tax planning and strategyTax planning and strategy is a smart operation for all taxpayers and business managers, so every taxpayer must know the best way of exploitation for the situation of investment, for example:Take the advantage of deduction and exemptionKnow the timing of cash flow which leads taxpayer to higher tax payment according to tax slides ( )X 8%, ( )X12%, (more 16000)X16%.Offer one tax report (self assessment) for husband and wife if both of them have separated income, that accepted by tax law
8 What is your opinion about tax avoidance !!?? The right selection for the legal entity for the firm or company, individual or partner or corporation, … associationMake the best benefit from expenses of medication , traveling, training, or by new fixed assets.* The benefit from the tax planning is a continuous operation round the time for the project to compare between several decision making:1- buy an asset or rental one, which is better? from the tax low's point of view. ?2- cash sales or credit sales or premium. The effect on cash flow.3- buy fixed assets by loan or new partner or new shares !!!What is your opinion about tax avoidance !!??
9 Income Tax concepts:General ConceptsAbility to pay conceptAdministrative convenience conceptArm's – length transaction conceptPay – as – you – go conceptAccounting conceptsEntity conceptAnnual accounting period conceptIncome conceptsAll – inclusive income conceptLegislative grace conceptCapital recovery conceptRealization conceptWherewithal – to – pay conceptDeduction conceptsLegislative conceptBusiness purpose concept
10 Tax characteristics: 1- Imposed obligatory (not selection process) 2- Imposed by the government for all individuals, partners, corporations.3- imposed pursuant legislative law.4- special benefits and services or privileges are not receive as a result of making the payment.5- paid cash.6- paid by regular amounts (periodic) annually, monthly or once only like wealth tax7- the payment of tax is ultimately (not available to restore it any way)
11 The importance of taxes: 1- Raising the revenue to be used for public or governmental purpose.2- The social effect of taxationby making the redistribution of large income for poor people (people without income)Imposing large taxes for unfavorable activities (cigarette, alcohol)** Note the revenue of these activities are very large when comparing with other revenues.3- The economic effect of taxationMake balancing for the prices.Controlling the inflation and local currency.Markdown prices in case of recession and unemploymentProvide some projects with taxation facilities to hire labor and local industries.4- protect the local industries by imposing large customs for import merchandise which has competitor local products to inhibit or reduce it.
12 The following are some products or goods, give your comment according the effect of taxation. Grandiose carsLocal clothesLocal soft drinks (cola , Meca cola, ….)Gaza and west bank.Transporting cars (for service or goods)White Paper and cleaning paperPlastic productsFruits ( Baitlahia, West bank, Israel )Mobiles