Does hiring tax advisory services save or cost my business money? This is the main question that most small and medium-sized enterprises (SMEs) owners ask when they think about working with a tax consultant. It’s no secret that hiring a tax advisor presents an upfront deductible expense for your business. That said, the return on investment (ROI) is worth it in the long run.
In fact, financial experts say that in the long run, the ROI from tax advisory services is over 200%, thanks to tax savings. But how exactly does a business benefit financially from tax advisory? This article examines how tax advisory services can save your business money.
How Tax Advisory Services Can Save Your Business Money
From experience, we’ve found that businesses lose a lot of money through taxes, but this can be avoided. For example, a lot of businesses, both large and small, overpay taxes. They don’t do this deliberately, but through missed reliefs, excessive withholding tax credits, failure to claim allowable deductions, and overestimation of annual profits.
This is where tax advisory services come in. Contrary to popular belief, tax advisory services are more about protecting your business’s cash flow and profitability, and less about tax compliance. Here are practical ways in which tax advisory services can save your business money:
Reducing Tax Exposure
Most businesses in Kenya think about taxes only when the deadlines are approaching. That can be monthly, semi-annually, or annually. Smart businesses plan their taxes all year round to make sure only the necessary taxes are paid. This is called tax planning, a proactive tax management strategy. Tax advisory saves your business money by:
- Paying taxes only when it’s necessary.
- Legally reducing the taxable income.
- Minimizing tax liabilities.
Tax planning can look like knowing when to invoice, how to structure business contracts, and how to classify certain costs to impact your tax liabilities.
Avoiding Penalties and Interests
KRA penalties and interests are a dent to your cash flow, yet they can be avoided. One of the many roles a tax advisor plays in your business is ensuring you’re tax compliant at all times. Here’s how tax advisory services help you avoid penalties and interest:
- Filing tax returns accurately and on time.
- Identifying potential tax exposure.
- Putting internal controls in place to reduce technical errors.
Avoiding costly penalties and interest can save your business hundreds of thousands annually.
Identifying Tax Savings, Reliefs, and Allowable Deductions
One of the most underrated benefits of having a tax advisory partner is knowing when tax-saving opportunities are available. Your tax advisor stays informed of all KRA affairs and can tell you when you are legally entitled to a deduction, tax relief, or claim. Legitimate opportunities to save on taxes are available; you just need to know when they are available and how you can take advantage of them. Tax advisory services help you identify:
- Allowable expenses.
- Capital allowances on qualifying assets.
- Industry-specific tax reliefs and other tax incentives.
- Valid and correct tax positions.
Without expert guidance, you may under-claim deductions or take incorrect tax positions that might attract KRA’s attention. Tax advisory services ensure your tax savings are maximized and defensible.
Recovering Money Through Tax Refunds and Claims
According to KTN Business, Kenyan businesses lose hundreds of thousands through unpaid tax refunds. Interestingly, these are the businesses that are aware of such refund policies and claims. Hundreds of small and medium businesses assume refunds are too difficult to pursue, leaving so much money on the table.
A tax advisor can give you the confidence needed to pursue this money legally and claim your money, which you can inject back into your business cash flow. Common refundable taxes include VAT refunds, withholding tax credits, and overpaid corporate tax. Here’s how tax advisory services help you save money through refunds and claims:
- Identifying valid refund opportunities.
- Maintaining and organizing refund documentation.
- Following up with KRA on your behalf to accelerate processing.
Preventing Costly Tax Disputes
Tax disputes don’t just cost you money. They cost you time and peace of mind. Whether it’s a KRA audit, a disputed tax assessment, or a full-blown dispute that escalates to the Tax Appeals Tribunal(TAT) or Independent Review of Objections (IRO), these disagreements are costly to your business.
With the help of tax advisory services, you can prevent these disputes. Disputes are rarely random; they are a result of accumulated issues. Your tax advisor can spot these issues and inconsistencies before they attract KRA’s attention and reaction. Here’s how a tax advisor prevents costly tax audits and disputes:
- Review your tax filings proactively to flag inconsistencies.
- Provide regular tax health checks to keep your business compliant.
In case a tax dispute occurs, they provide support through the objection process, represent you before KRA, and handle negotiations.
Optimizing Business Structuring
Poor business structuring can lead to permanent tax leakage that compounds over time, costing your business more money in the long run. That’s why businesses seek tax advisory services as they grow to optimize their tax position. A tax advisor can help you structure your business such that the way it’s legally set, operated, and scaled results in the lowest sustainable tax cost in the long run. They help you:
- Choose the right business legal structure from a tax perspective.
- Optimize ownership and shareholding structure.
- Separate business activities to ring-fence high-risk activities.
- Structure business transactions for tax efficiency.
Improving Your Overall Financial Health
Tax advisory services improve your cash flow and financial predictability. You’ll be aware of how much tax you owe and when it’s due at all times. This provides peace of mind, helping you focus on the core activities of running and growing your business. Here’s how a tax advisor makes your financial health better:
- Provide clear tax forecasts.
- Let you know of upcoming tax obligations.
- Offer predictable tax payment schedules.
This financial stability fosters business growth, helps you manage your finances well, and make informed decisions.
Final Thoughts
Most businesses see tax advisory services as an additional and optional expense. In reality, they are a financial strategy. They are a cost-saving investment in the long run, saving on taxes, preventing costly penalties, protecting your revenue, and reducing financial risks.
Are you a business seeking practical and results-driven tax advisory services in Kenya? Gichuri & Partners provides comprehensive tax advisory services to businesses of all sizes. We are focused on compliance, efficiency, and tax-saving strategies. Contact us today for a free consultation.
