04-10-2004, 11:55 PM
Hi
Reference your question about bonus. Bonus does not reduce tax liability. Infact the only tax liability reducing strategy is where you can manipulate timings of payment. Thus for bonus to employees its fixed. Moreover salary does not have any deductions. This complicates the case.
OPtion one is to have some equipment like computers which are your property used for business. They attract depriciation even in the hands of employee and thus can to some effect offset the bonus payment.
Option two is to have performance payment - even bonus in the shape of stock options. Then you can easily manipulate timmings and plan tax. This is recommended option.
Though I am not current on the exact case law, but I distanctly remember that their was some case law which excluded bonus from salary on the grounds that salary is definite even before earned whereas bonus is not definate since it may or may not be announced. This should have support of your past bonus income history to prove the fact that your bonus was subjective even till announcement. This shifted bonus from salary to other income. However I may warn you that I just remember having read this case law in distant future. Please dig it out before you proceed. Best option still is having performance based bonus as share option. Thsi shall open a world of tax planning and additional income opportunities to you.
Aamer Sikandar
Reference your question about bonus. Bonus does not reduce tax liability. Infact the only tax liability reducing strategy is where you can manipulate timings of payment. Thus for bonus to employees its fixed. Moreover salary does not have any deductions. This complicates the case.
OPtion one is to have some equipment like computers which are your property used for business. They attract depriciation even in the hands of employee and thus can to some effect offset the bonus payment.
Option two is to have performance payment - even bonus in the shape of stock options. Then you can easily manipulate timmings and plan tax. This is recommended option.
Though I am not current on the exact case law, but I distanctly remember that their was some case law which excluded bonus from salary on the grounds that salary is definite even before earned whereas bonus is not definate since it may or may not be announced. This should have support of your past bonus income history to prove the fact that your bonus was subjective even till announcement. This shifted bonus from salary to other income. However I may warn you that I just remember having read this case law in distant future. Please dig it out before you proceed. Best option still is having performance based bonus as share option. Thsi shall open a world of tax planning and additional income opportunities to you.
Aamer Sikandar
