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Taxation is an integral part of running a business and entrepreneurs engage top tax consulting firms for corporate tax planning. These agencies help in meeting compliance requirements like filing corporate tax returns in India as well as suggest legal ways to cut down the tax liabilities. A commonly employed tactic to adapt to the changing taxation environment and minimize payable taxes is corporate restructuring. The practice does not yield expected results as it is implemented without identifying the specific goals that the organization wants to achieve. Some valuable advice for company restructuring is being presented here which will be helpful in effective corporate tax planning.

1. Do Not Cut The Good Costs

One of the biggest mistakes that companies make during corporate restructuring is cutting down the wrong costs. Most of the time the reorganization is a knee-jerk reaction to a newly-announced tax regulation or changes made to the slabs. The leadership group is focused on bringing down the payable taxes without giving a thought to future growth prospects. Paring down on the budget for a section or a process that would have helped in growing the business will prove to be detrimental to the organization in the long run.

Some companies go ahead and make cost cuts across the board so that each department shows a certain percentage deduction in applicable taxes. This is again a thoughtless exercise that will ensure that fewer taxes will be paid that financial year but affect the company’s long-term financial health. It is essential that corporations engage experts who can provide valuable input for restructuring in a manner that the goal of cutting taxes is met without compromising on business growth.

2. Factor In Other Tax Implications

Companies trying to escape a new tax may well have to pay another if they created the restructuring plan without proper thought. Let’s say a corporation, in order to avoid paying taxes in multiple geographical locations, and reduce corporate tax planning and management expenses, moves all its facilities to one location. The organization definitely made savings by reducing operational costs and simplified the tax compliance process which does not require keeping track of multiple tax slabs.

What it did not, however, factor in was the high amount of taxable income in that particular location which ultimately kept the tax liabilities figure more or less the same as before. This happened because the corporation was focused on solving only one issue and did not conduct studies that would have helped in identifying the new problem. It is, therefore, essential for companies to first understand the tax implications of their decisions before moving ahead with a restructuring plan.

3. Educate Executives About Tax Issues

It is vital that the corporate tax plan elements are incorporated into the company restructuring initiative. This can be done by educating the executives involved in planning and implementing the reorganization program about taxation issues. Most of the time, the people saddled with the responsibility for corporate restructuring treat taxation as a separate issue that will be handled by other professionals.

The management personnel must be told to plan the initiative in such a manner that it also helps in efficient tax management. Even if the people would not be equipped to handle such matters, they will identify potential problem areas and will know to approach experts for relevant advice. Tax rules and regulations keep changing regularly and executives must keep track of such changes as they invariably influence the efficacy of their business decisions. Enterprises that run operations in various geographical locations need to be even more proactive in educating their executives as they have to keep track of multiple laws and regulations.


Effective corporate tax planning during a restructuring program is possible only if the organization has conducted extensive research for understanding the implications of the change by engaging experts for the purpose.