Are you a business owner looking to transfer company wealth to private ownership?
If so, at some point you will turn your attention to one important issue; how to turn company cash into private ownership in a tax efficient manner. Transfering company wealth into private ownership can be tricky. Guardian Wealth can help to do this in a tax friendly way through pension planning.
One of the most frustrating elements of running a successful business is the fact that as you make money, your profits are subject to corporation tax of 12.5%. There is also the problem of taking money out of your business in the form of salary. This consequentially exposes yourself to income tax, PRSI and USC of up to 55%.
The two most common questions we get asked by business owners are:
- How can I reduce my corporation tax bill, and
- How can I extract cash from my business in a tax efficient manner?
A tax efficient pension planning strategy will address both questions:
1.Corporation Tax – Whilst a 12.5% corporation tax rate is not in a global context the most penal rate out there, it is none the less a tax on your profits and hard work. Pension Planning provides a solution. Your business can make direct payments to a Company Pension for your benefit. The payment made by the company is an allowable expense, so it reduces your profits and thus reduces your corporation tax liability. Furthermore, the payment made by the company to a pension for your benefit is not liable to income tax, PRSI or USC. This is because your pension is deemed to have received the payment and not you personally.
2. Wealth Transfer / Cash Extraction – We are always been asked how to transfer wealth tax free. The transfer of company cash to a pension for your benefit as outlined above is in effect the transfer of company wealth / cash to private ownership. It also has the added advantage that monies held in a company pension, under trust for your benefit, are ring fenced from creditors in the event of you or your business getting into financial difficulty. When you access your pension later in life you can extract up to €200,000 tax free. This is along with another €300,000 at a 20% tax rate depending on your individual circumstances.
You still have time to make a company pension payment in order to reduce your year end 2018 corporation tax liability.
Guardian Wealth have a wealth transfer strategy for you. We offer pension advice for Business owners & professionals with no commitment. If you have questions, please feel free to contact me, Michael Coburn, using the contact details listed below.
Dublin 01 5267770
Wexford 053 9110380
Michael has been providing tax, investment and lifetime financial planning advice to clients since 2005. He has an in-depth understanding of Business Owners and their requirements, which allows him to guide his clients through the complex world of long-term financial planning.