Retirement as arbitrage of the tax system

Asked by: Dean Portillo

What is a tax arbitrage?

Tax arbitrage is the practice of profiting from differences that arise from the ways various types of income, capital gains, and transactions are taxed. Both individuals and corporations seek to pay the least amount of tax that they legally can; they can accomplish this in many different ways.

Do you pay taxes on arbitrage?

Since arbitrage funds are categorised as equity funds, they are taxed accordingly. This gives arbitrage funds the benefit of zero taxes on the LTCG (long-term capital gains). If you hold the investments for more than one year, the returns are considered to be LTCG, and are tax free.

What is tax arbitrage Philippines?

Interest expense has been a common tax savings device in the past using the “tax arbitrage” scheme. Under this tax arbitrage in the Philippines, taxpayer would secure a loan simply to generate interest expense thereby reducing the taxable income and enjoying a tax benefit thereto.

What is tax minimization?

Tax minimization is the process of assessing and reducing an individual’s or business’ tax liability through careful planning. With the ever-changing tax code, it’s important to determine what does and does not apply to your specific tax situation.

Does arbitrage have risk?

In principle and in academic use, an arbitrage is risk-free; in common use, as in statistical arbitrage, it may refer to expected profit, though losses may occur, and in practice, there are always risks in arbitrage, some minor (such as fluctuation of prices decreasing profit margins), some major (such as devaluation …

What is the IRS loophole?

A tax loophole is a tax law provision or a shortcoming of legislation that allows individuals and companies to lower tax liability. Loopholes are legal and allow income or assets to be moved with the purpose of avoiding taxes.

Are arbitrage funds safe?

Arbitrage funds are a safe option for risk-averse individuals to safely park their surplus funds when there is a persistent fluctuation in the market.

What is the tax sparing rule?

The credit is equivalent to a particular amount representing the difference between the regular corporate income tax rate and the reduced 15% tax rate. This preferential tax rate is still present in the current Tax Code and is popularly known as the “tax sparing rule”.

What is not paying taxes called?

tax evasion: an overview

Tax evasion is using illegal means to avoid paying taxes. Typically, tax evasion schemes involve an individual or corporation misrepresenting their income to the Internal Revenue Service.

What is the tax benefit rule?

Legal Definition of tax benefit rule

: a tax rule requiring that if an amount (as of a loss) used as a deduction in a prior taxable year is recovered in a later year it must be included in the gross income for the later year to the extent of the original deduction.