The use of tax avoidance arrangements and complex financial structures by companies on a global scale to reduce tax costs is a complex and controversial topic. Although these practices are legal in some cases, they may also raise ethical, legal, and social responsibility questions. The following are some common strategies and structures that companies may use to legally reduce their tax burden： ### 1. **Take advantage of tax incentives** -**Tax treaties**: Many countries have signed bilateral tax treaties to avoid double taxation and reduce the tax burden on multinational companies. Companies can enjoy lower tax rates by setting up subsidiaries or branches in these countries. -**Special economic zones**: Some countries have established special economic zones or free trade zones to provide tax exemptions, tariff concessions and other policies to attract foreign investment. ### 2. **Transfer Pricing (Transfer Pricing)** -**Internal transaction pricing**: Multinational companies can transfer profits to countries or regions with lower tax rates by adjusting the transaction prices between their subsidiaries. For example, a company can set up a subsidiary in a low-tax country and license the right to use intellectual property rights or brands to a subsidiary in a high-tax country at a high price, thereby transferring profits to a low-tax area. -**Cost sharing agreement**: Through the cost sharing agreement, an enterprise can distribute R&D expenses, management expenses, etc. to subsidiaries in different countries, thereby affecting the profits and tax burden of each subsidiary. ### 3. **Set up an offshore company** -**Tax havens**: Companies can set up offshore companies in tax havens (such as the Cayman Islands, Bermuda, the British Virgin Islands, etc.) to take advantage of the extremely low or zero tax rates in these regions and transfer profits to these companies. -**Holding company structure**: By setting up a multi-tier holding company, companies can transfer profits to low-tax or tax-free areas through a complex equity structure, thereby reducing the overall tax burden. ### 4. **Debt financing and interest deduction** -**Thin Capitalization**: Companies can reduce their tax burden by setting up subsidiaries in high-tax countries and through debt financing (rather than equity financing). Interest expenses can usually be deducted before tax, thereby reducing taxable income. -**Internal loans**: Multinational companies can transfer profits to low-tax areas through internal loans between subsidiaries. Subsidiaries in high-tax countries pay interest to subsidiaries in low-tax countries, thereby reducing the tax burden of high-tax countries. ### 5. **Intellectual property rights and intangible assets** -**Intellectual property holding**: An enterprise can transfer intellectual property rights (such as patents, trademarks, copyrights, etc.) to a subsidiary in a low-tax country, and collect royalties through authorized use, thereby transferring profits to low-tax areas. -**Transfer of intangible assets**: By transferring intangible assets to subsidiaries in low-tax countries, an enterprise can reduce its taxable income in high-tax countries. ### 6. **Hybrid entities and financial instruments** -**Mixed entities**: Some countries treat corporate entities differently from other countries in their tax treatment. Companies can take advantage of this difference to reduce their tax burden by setting up hybrid entities (such as certain types of partnerships or trusts). -**Hybrid financial instruments**: Companies can use certain financial instruments (such as convertible bonds, preferred stocks, etc.). These instruments are regarded as debt in one country and equity in another, thereby taking advantage of differences in tax rules in different countries to reduce the tax burden. ### 7. **Profit remittances and deferred taxes** -**Profit return strategy**: Companies can defer taxes in their home country by delaying the return of overseas profits to their home country. Some countries allow companies not to tax their profits until they are remitted. -**Profit retention**: Companies can keep profits in subsidiaries in low-tax countries instead of remitting them back to the parent company in high-tax countries, thereby reducing the overall tax burden. ### 8. **Tax planning and legal compliance** -**Professional tax consulting**: Companies usually hire professional tax consultants and lawyers to help design complex tax structures to ensure that their arrangements comply with the tax laws of various countries, while minimizing the tax burden. -**Legal compliance and risk management**: Although companies may adopt legal tax planning methods, tax authorities in various countries are increasingly reviewing tax avoidance behaviors. Companies need to ensure that their tax arrangements comply with relevant laws and avoid facing fines or other legal consequences for non-compliance. ### 9. **Digital economy and tax challenges** -**Tax planning in the digital economy**: With the development of the digital economy, many multinational companies (such as technology companies) can operate globally through online services without the need to set up entities in various countries. This makes it easier for companies to transfer profits to low-tax areas. -**BEPS Action Plan**: In order to deal with the tax avoidance behavior of multinational companies, the Organization for Economic Cooperation and Development (OECD) has launched the “Base Erosion and Profit Transfer” (BEPS) Action Plan, which aims to reduce the tax avoidance behavior of multinational companies through international cooperation. ### 10. **Social responsibility and public image** -**Corporate social responsibility (CSR)**: Although tax planning may be legal, excessive tax avoidance may damage the public image of a company and cause dissatisfaction among consumers, investors and the government. More and more companies are beginning to pay attention to their tax transparency and publicly disclose their tax strategies to maintain their image of social responsibility. ### Conclusion The use of tax avoidance arrangements and complex financial structures by companies on a global scale to reduce tax costs is a complex process that involves the laws, tax rules and international agreements of multiple countries. Although these strategies are legal in some cases, they can also cause ethical and legal disputes. Companies need to find a balance between tax planning and compliance, while at the same time