If you're going into business for yourself, regardless of whether it's a sports therapy clinic or an import export business, there are two things you'll need to know about before you begin: duty and taxes. Duty and taxes have been the downfall of many businesses simply because their proprietors either didn't know enough about them or decided they could get away with disobeying the rules. Let this article serve as your introduction to this complex topic.
Taxes are the method by which governments generate revenue. By skimming a certain percentage off of all sales conducted within the country and by taking a chunk of each person's earnings, countries are able to buy things ranging from equipment for public school gymnasiums to military jets and x-ray machines for public hospitals. As a consumer your taxes are fairly straightforward, but as a business owner you will have to deal with a more complex system of deductions.
Most governments recognize that you have to spend money to make money when you're a business owner, so you will be able to get back the sales tax you have paid on the materials for the doll house you sold by claiming it against your income taxes. Keeping your personal and business expenses separate can be tough, so many people find incorporation to be a help. You may also be able to get tax breaks depending on where you set up your business and what it does. You can click here for a free business expense spreadsheet template.
You may think you can get around paying tax on the materials you need for your business by purchasing the items you need from a country that does not have sales tax. Your government, however, has already thought of this, which is where duty comes in. Duty is an import tax that must be paid on any items that are brought into the country. Factoring in duty, it may not actually be cheaper to buy used woodworking equipment from outside the country.
Duty may seem like a pain for you when you're setting up your business but it also acts to protect you as well by making sure other businesses who need the type of machinery you sell can't buy a cheaper version abroad. Duty is mainly aimed at businesses, which is why most governments allow private citizens to bring back a certain amount of goods with them from their vacations abroad duty free.
If you found this article interesting, you may also be interested in the article entitled "Anything to Declare".