Tax planning differences from tax avoidance

The aim of this paper is to define the line between tax planning and tax avoidance. Therefore, the author comprehensively researches the definitions of tax planning and tax avoidance, their features and the means of prevention of tax avoidance. In this paper, the author gives the scheme of process of legitimate tax planning: it‘s stages, basic principles and possible lawful methods to decrease a tax burden. It should be noted that tax planning could be accepted as legitimate only if it does not agree with anti-avoidance rules. Consequently, the author analyses general anti-avoidance rules (GAAR) and specific anti-avoidance rules (SAAR) as well as their relationships with legitimate tax planning. It is presented a comprehensive analysis of GAAR. Also the author studies the most common SAAR such as thin capitalization rules, taxation of foreign controlled corporations and transfer pricing. Moreover, the author examines the rules of activities of offshore companies and the rules that limits the activity of such companies