Tax Planning In Enterprise Financing Decision

Successful enterprises are often rational taxpayers. They not only know how to make profits by virtue of wisdom, but also know how to avoid tax by virtue of wisdom.

In the modern "small profits but quick turnover" buyer's market environment, tax planning has become an important focus of modern enterprise financial management.

China has joined the WTO. With the further development of China's market economy, enterprises have become independent accounting entities and legal subjects.

Under the background of global economic integration, with the pursuit of profit, rationalization and autonomy of corporate behavior, tax planning has become the right of every tax payer.

In the face of fierce market competition at home and abroad, enterprises must occupy market share and become bigger and stronger so as to maintain their competitiveness.

Compared with the tax planning which has been prevalent in western countries, the tax planning of our enterprises is still very immature.

It is undoubtedly a question for every rational economic man to think about and how to make tax planning in a reasonable and lawful way in Chinese enterprises.

China's enterprises should learn to plan and lighten the tax burden within the scope permitted by law or without violating the provisions of the tax law, so as to maximize the wealth of enterprises.

Financing decision is a problem that any enterprise needs to face. It is also one of the key problems for the survival and development of enterprises.

Corporate financing is mainly to meet the needs of investment and capital utilization. According to the different sources of capital, the fund-raising activities can be divided into equity financing and debt financing, thus forming different capital structure of enterprises, resulting in different capital costs and financial risks.

The application of tax planning in raising funds is to rationally arrange the proportion of equity capital and debt capital and form the optimal capital structure.

In the process of financing, enterprises should consider the following aspects:

1, the impact of financing activities on the capital structure of enterprises.

2, the impact of changes in capital structure on tax costs and corporate profits.

3, the choice of financing mode has an impact on optimizing the capital structure and reducing tax burden on the maximum profits of enterprises and owners after tax.

Enterprises directly absorb

The rights and interests of stock issuing, retained earnings and other rights and interests are raised to raise their own funds. Although the risk is small, dividends paid and dividends paid in the post tax profits can not play the role of reducing the income tax, and the cost of enterprise funds is high.

If debt is raised by raising funds from banks or other financial institutions or issuing bonds, the interest paid can be counted before taxes.

So as to reduce the pre tax profits of enterprises and enable enterprises to get tax saving benefits.

However, the higher debt ratio will affect the future financing cost and financial risk, so the higher the debt ratio is, the better.

Long term liabilities

The leverage is reflected in the increase of the return on equity capital and the earnings per share of common stock, which can be reflected from the following formula:

Equity capital yield (pre tax) = pre tax investment yield + debt / equity capital (pre tax investment yield - debt cost ratio). Therefore, as long as the pre tax investment yield of enterprises is higher than the debt cost rate, increasing the debt limit and raising the proportion of liabilities will bring the effect of the increase in the rate of return on equity capital.

However, the effect of the increase of the equity capital yield will be offset by the gradual increase of the financial risk and the risk cost of the financing. When the two reaches a general balance, it will reach the maximum limit of increasing the debt ratio. Beyond this limit, the financial risk and the cost of financing risk will exceed the increase of the equity capital yield, and it will also reduce the profit after tax and reduce the return on equity capital.

[Thesis web LunWenNet.Com]