The Sooner A Company Gains, The Better? (1)

There are two foreign-invested enterprises specializing in the production of wear-resistant materials in Guangzhou. One of them is an American joint venture and the other is a German joint venture. Both companies have been put into operation since 1995.

The estimated production period for us funded enterprises is 15 years, and the expected production period of German enterprises is 20 years.

From 1995 to 2001, the performance of the two enterprises was shown in Table 1 and table 2 respectively (two enterprises were exempt from local income tax).

According to the regulations of "two exemption, three and half" of foreign investment enterprise income tax, the total amount of income tax paid by US funded enterprises in the past 7 years is 450 thousand yuan, while German enterprises should pay 1 million 635 thousand yuan in income tax.

Why do foreign investment enterprises with the same nature have the same profits and different taxes?

This is caused by the different utilization of the preferential tax policies of the two enterprises for "three exemption and half reduction", which is caused by the different utilization degree of enterprises' annual regulations on starting profits.

According to the provisions of the tax law, the foreign-funded enterprises enjoy the "two exemption, three reduction and half" tax preference period from the first profit year of the enterprise. If the enterprise has a loss in the initial stage, then the year that the profit after the loss is made up is the first profit year. After the profit year is determined, the term "two exemption and three reduction" is calculated, regardless of whether the enterprise has suffered any losses again.

Therefore, the key to the planning is the proper arrangement of the opportunity for the first profit year, and the maximum possible use of the "two - three - reduction" policy.

Generally speaking, when a company has just started its operation, it has little knowledge of the industry because of its small scale and low reputation. It often loses money or is only slightly profitable.

With the expansion of the scale of enterprises and the improvement of visibility, the business performance of enterprises will continue to improve, and the annual profit will also increase correspondingly.

If the enterprise pursues the profit volume, it will establish the first profit year in the first one or two years of its operation. Then, because of the small profits of the initial business, it will enter the preferential period of "two exemption and three halves" too early. Therefore, the amount of tax deductible can be very limited. In the later years, the more profits will be paid in full.

Therefore, in order to make the best use of the preferential policies of "two exemption, three reduction and half", enterprises must be good at arranging the investment of funds, plan rationally all the production and operation activities of enterprises, and try to delay the initial profit making year.

Specifically, if enterprises predict small profits at the end of the first year, or if the enterprises make up for the previous losses in the early stage, they will find profits this time, but the profit is not very large. At this time, we can consider expanding the expenses, such as increasing advertising efforts and increasing the cost of research and development of products.

This will not only enable enterprises to fully enjoy the reduction and exemption of large profits in the following years, but also the early advertising and research expenditures can play a positive role in promoting the development of enterprises and help enterprises to develop in the long run.

According to this idea, we will analyze the tax situation of the two enterprises mentioned above.

In 1996, the company started a 500 thousand yuan loss in the first year of production and operation. It needed to make up for the profit in the following year. In 1995, it made no profit after making up for the loss in 1995.

In this way, the company continued to make up for it, and in 1999, the company made profits after making up the deficit.

Therefore, 1999 is the beginning of the profit year.

According to the regulations of "two exemption, three reduction and half", the profits of the company in 1999 and 2000 are tax free, and the profits in 2001 are reduced by half by income tax.

In this way, the income tax paid by US funded companies in 7 years is 300 x 15% = 45 (10000 yuan).