All wealth on which we rely to ensure our daily life, of our family, of our children, whether it is a real estate asset, a business or a financial asset, is subject to taxes.
Taxes, of course, are used to keep our society running smoothly. Taxes and duties constitute the bulk of the State's income. They are used to build our roads, our schools, our hospitals and to pay the staff who treat and educate our children. Taxes are obviously more than useful, they are necessary to ensure the sustainability of our modern societies and economies.
There are direct taxes collected on our assets such as Income Tax, Corporation Tax, Wealth Tax and indirect taxes such as VAT.
It is often said (and quite rightly) that the tax burden is becoming increasingly intolerable from year to year, especially for companies and entrepreneurs. Many businesses and individuals are looking for ways to save taxes in order to escape this excessive tax burden.
Tax optimization means knowing the strategies that allow you, while respecting the law and tax laws, to reduce the amount of taxes you should pay. A journalist who earns 50,000 euros per year, deducts 10% of real expenses when filing his income tax return, and benefits from a tax reduction...he does tax optimization! In real estate, for example, some Law allows a buyer to benefit from tax advantages offered by the law and thus optimizes his taxation. There are so many other examples of tax optimization...
Everyone, individuals as well as companies can have the opportunity to use tax optimization with the assistance and advice of professionals, lawyers, accountants or entrepreneurs who have become specialists by necessity... who can, for you, adapted to your specific case, advise you on a legal optimization.
Of course, tax evasion also makes it possible to reduce taxes drastically, but we must not forget that this is illegal. Even if the advantages are sometimes very tempting, it is against the law and is punishable by penalties and imprisonment.
According to the European General Tax Code, TAX FRAUD "is an infringement of the Law committed with the aim of evading taxation or of reducing the amount thereof". It is the act of evading or attempting to evade, fraudulently, the total or partial payment of the Tax. Tax fraud involves deliberate (and not unconscious or bona fide) intent to defraud and material elements (e.g. omission or underreporting, deliberate error, insolvency organisation or other manoeuvres). It is punishable by law (financial fines or even imprisonment for the most serious cases).
Tax avoidance is the use of legal means that optimize loopholes in the tax system to reduce tax burdens. Tax avoidance therefore consists in minimizing taxes by declaring all or part of one's assets or an activity in another country, such as Georgia, where taxation is most advantageous without the taxpayer expatriating himself.
But you can also choose to "reside" in this country ( Georgia is one of the least taxed countries in the world) and obtain a tax residence in Georgia and, there, take full advantage of all the tax privileges of Georgia, a country that becomes year after year an increasingly popular destination to live, create a company and diversify its business.
Avoidance contrary to appearances is completely legal! This is a form of circumvention, a form of tax optimisation designed to reduce its tax burden. Georgia, if you choose it as your tax residence, will offer you very interesting advantages. Close to paradise?
Like all taxpayers, we are often against the continuous increase of taxes and their finally confiscatory character. The French, especially entrepreneurs, are among the most taxed people in the world. And yet, everyone in France knows that paying taxes is compulsory and necessary. France has one of the most efficient public services in the world, the most modern hospitals and health system, it is thanks to taxes that the French State can offer an efficient health and transport service, a free school for all, etc.... Without taxes, this effort, to constantly improve our society, would no longer be possible.
But what have we been noticing for many years? Tax revenues are declining from year to year although the country is still richer. Tens of billions of euros evaporate without the tax authorities being able to collect their tenth... Why? Because of tax optimization and avoidance...and of course fraud.
Like you, who read this blog, we are people, expatriate entrepreneurs in Georgia in this case, who are faced with a paradox, a certain ambiguity. On the one hand, morality and the principle of equality force us to pay our taxes properly as all other citizens do. On the other hand, the globalized economic crisis and declining purchasing power, the desire to be paid in proportion to all the sacrifices we make every day to support our families and employees, push us to take advantage of the opportunities offered by the tax system to pay less taxes.
We French entrepreneurs living in Georgia, we want to pay less taxes! But we want to do it right. For the good of our families and our employees. Most of these techniques are completely legal and even generate positive counterparts for the French economy but also Georgian because, thanks to optimization, naturally respecting the law, it allows us to reinvest in our company, innovate and develop new markets, recruit new employees in our two countries, the one where we were born and the one that adopted us, and especially to pay them well. This is our demand! To grow our business and our shareholders who have grown in us, our suppliers, our employees and our family circle.
There are many tax optimisation mechanisms all over the world, also known as tax exemption, established especially to boost an economic sector. States provide a wide variety of incentives in the form of tax reductions or credits. This is how tax exemptions under the Pinel law or the Girardin law were invented in France to propose a solution to the lack of rental property in tense zones. These tax optimisation mechanisms necessarily reduce the State's revenues, but in return make it possible to provide housing for tens of thousands of families each year. That is indeed very positive.
So making donations, investing your money in savings, making improvements to your home give tax advantages. Their purpose is not primarily to reduce taxes, but for other reasons: to lower energy bills, to build up emergency capital, to help those in difficulty and so on.
It is therefore imperative to understand first what tax optimization is and the different techniques used. Once you have done this, you need an expert to guide you through the tax package. After an in-depth analysis of your personal situation, your tax advisor will develop the most appropriate strategy to provide you with the best possible tax reduction.
But even if you already have sufficient knowledge on the subject and call on a tax professional, this may not be enough. A carefully prepared tax package can very well become tax evasion in the eyes of the tax authorities. Indeed, they have the possibility of reclassifying a transaction using the abuse of rights procedure. The latter is aimed at sanctioning arrangements whose only purpose is to avoid paying taxes.
Tax optimisation, which therefore refers to all processes for reducing the legal tax burden, is not the only device used to reduce taxes. There are also other types of tax relief.
For a company that pays tens of thousands in profit tax each year, it is very interesting to base its business on a territory like Georgia which levies 15% tax on profits or 0% if these profits are reinvested. With this advantage, these companies should be taxable in Georgia.
Who does not know that, thanks to the taxes collected, the State carries out its various missions such as free education, the care of part of the population's health care, etc.? If you do not pay taxes, there is therefore a huge risk that the States will no longer be able to carry out these missions.
Out of love for others, out of respect for equality and other virtuous principles, some people simply refuse to do tax optimisation.
Whether we like it or not, we must pay taxes to enable the State to carry out its missions. Today, there are mechanisms such as tax optimisation that make it possible to reduce the amount of taxes due. Lack of knowledge, fear or virtue, we are surprised to see that tax optimization remains little adopted.
We think it is fair to pay taxes, to care how they are used, whether they are well used and not spent unnecessarily. But above all, we do not want them to appear to us as confiscatory and prevent the good development of our companies and the good remuneration of our employees. Because we believe that optimization would be even a duty of the company whose objective is to prosper, within the limits authorized by the law! In the global world in which we live, to give up doing so would be to give weapons to competition which does not deny itself the right to do so. Tax optimisation is not only a right, it is also a duty for the manager of a company.
To summarise our thinking: "Pay taxes! Yes! But not too much..."
Everyone will be free to judge whether it is immoral or inappropriate to seek to follow this motto...