Tax avoidance is the legal utilization of the tax law regime to one’s own advantage, to reduce the amount of tax that is payable by means that are within the law. By contrast, tax evasion is the general term for efforts not to pay taxes by illegal means.
The term tax mitigation or tax shelter is a synonym for tax avoidance.
Use of Legal Entities
Without changing country of residence (or, if a U.S. citizen, giving up one’s citizenship), personal taxation may be legally avoided by creation of a separate legal entity to which one’s property is donated. The separate legal entity is often a company, trust, or foundation. Assets are transferred to the new company or trust so that gains may be realized, or income earned, within this legal entity rather than earned by the original owner.
Tax Avoidance – The reduction or elimination of tax liability by lawful methods. ~Collins English Dictionary.
The company/trust/foundation may also be able to avoid corporate taxation if incorporated in an offshore jurisdiction (see offshore company, offshore trust or private foundation). Although income tax would still be due on any salary or dividend drawn from the legal entity. For a settlor (creator of a trust) to avoid tax there may be restrictions on the type, purpose and beneficiaries of the trust. For example, the settlor of the trust may not be allowed to be a trustee or even a beneficiary and may thus lose control of the assets transferred and/or may be unable to benefit from them.
What is your Effective Tax Rate? Americans with the highest adjusted gross income pay an effective tax rate between 13% and 17%. Is that an accident? No, it’s the result of shrewd tax strategies. Many multi-millionaires pay little or no federal income tax… legally! You can too.
What does America’s most profitable corporation, Apple, pay for its income taxes? It’s effective tax rate was just 9.8% in 2011, while the corporate rate was sitting at 35%. Accident? No. Just smart tax planning.
Do the math! What would a 5% or 10% reduction in your tax rate save you? What could you do with your tax bill if it was deferred for five or ten years? Stop wasting your money, and explore your options for tax savings and deferrals before you give away any more money to Uncle Sam.
Opportunities Abound! Our laws are rife with opportunity to avoid, lower, and defer tax liabilities. You need only utilize a smart and creative tax attorney to realize the same tax savings as many of our wealthiest businessmen.
Put the extensive experience of Charles J. Lybarger to work for you. Call 702-340-2335 to get started.
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