Occasionally the two terms get muddle up and some people think that it is the same. In fact they are vastly different as one is illegal while the other is skirting on the legality side or using benefits set out by the law to achieve better utilisation of resources.
For example, with tax evasion, it can come in many forms. One of the most common form of tax evasion has been the use of fraudulent expenses claims. Person expenditures becomes company’s expenditure hence lowers the company’s net bottomline. It should have been strictly classified as personal expenses and hence the need to remove it away from the company’s account. For example, a director of a company brings his family out for a good dinner at a classy restaurant and decided to use that particular bill to claim entertainment.
Hence for a person who is truly claiming entertainment do ensure that on the back of your receipt, clearly state the name of the person whom you are entertaining and the number of people who are being entertained. State also the personnel from your company as part of the entertainment. It has been known that occasionally the manager who is entertaining other people brings along his own family members or spouses which incidentally should not be claim if the strictest part of the law is followed. If you truly want to bring, make sure you justify as in like the customer knew your spouses and would be part of entertaining. Otherwise apportionate the sum out. This is necessary as restaurants nowadays keep a record of number of people in a bill.
Tax planning on the other hand is 100% legal. For example in the purchase of properties for investment purposes, interests can be claimable. Make sure you do not go into the illegal part of property investment by stating that you receive no rental income when you actually do. Under the rulings, you can only claim one property rental-free-from-income-tax. For the second and above property, rental should not be below 70% of the real market value of rental. Once again, if you have followed the rules, there will be no need to justify to the IRB.
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