Tax planning is a purposeful activity of the enterprise focused on maximum use of all peculiarities of the existing legislation in order to achieve the best financial results by means of legal optimization of economic activities of the enterprise in terms of its tax implications. Distinctive feature of tax planning is in its choice of alternatives, which, relatively speaking, provides an opportunity for tax optimization.
Tax optimization is a choice of such option for doing business, which provides the best financial result due to the rational tax policy of the enterprise and effective use of fiscal instruments in the framework of existing legislation.
Thus, tax optimization, which is the basis of tax planning, is a broader concept than legitimate tax minimization, in which the final financial results of economic activities is of minor importance.
Large group of special methods is used in tax planning along with common planning methods (balance, analytical, etc.) due to its nature of optimization:
- relations replacement method;
- relations separation method;
- method of direct reduction of tax object;
- method of tax delegation to associated enterprise;
- method of taxes deferral;
- offshore method;
- method of preferential enterprise;
- method of accounting policy use.