What is the difference between tax planning and tax advisory?

The main focus of the tax planning is on providing the good service for clients when it comes to their taxes. Guidance is typically centered on optimizing tax outcomes within the current tax environment. and the Tax advisory is more about teaching the client to make the best possible financial decisions.

During the annual tax preparation season when employees work collaboratively to ensure effective compliance, tax preparation steals the show; tax planning moves to a steady rhythm … but tax advisory? Well, that’s the constant companion, unbothered by seasons, always present throughout your financial journey. Tax planning and tax advisory both might feel the same and used interchangeably but in actual they offer totally different functions, scope, objectives and timing. While tax planning is more emphasized on minimizing tax liabilities within a financial year, tax advisory on the other hand provides a broader perspective, offering insights into more complicated issues and regulatory risks. Having a comprehensive understanding of both helps companies in taking the most informed decisions, maximize savings, and maintain compliance with ever-evolving tax regulations. This blogpost further helps you understand the key differences between tax planning and tax advisory services with its objectives, benefits, coverage and timeline.

1.   Tax Planning

Tax planning is a complete methodology of handling financial matters in a process which legally minimizes tax liabilities. It additionally involves the organization of income, expenses, investments and structuring financial portfolio in a way that it helps with deductions, exemptions and incentives offered by tax authorities. Some of the tax planning types include:

• Short term tax planning: More focused on short term actions to reduce tax liabilities in the present financial year
• Long term tax planning: Emphasize on building plans that last for several years such as business structuring and building trust.
• Permissive Tax planning: Utilizes techniques that are only permitted by laws.
• Purposive tax planning: Planning done to achieve a specific target, goal or merger support

Some of the common tax planning processes include investing in funds that are tax efficient, structuring salaries and choosing the right business entity.

Objectives of Tax planning

• Utilizing the best suited legal procedures to minimize tax liabilities
• Taking thoughtful decisions in increasing investment opportunities
• Making sure of long-term financial productivity for better outcomes.
• Help in meeting both long term and short-term goals to remain compliant and achieve goals.
• Spotting potential risks and guaranteeing accurate record-keeping to reduce audits and disputes.

2.   Tax Advisory

Tax advisory is a complete step by step guidance provided by tax consultants that is not just bounded to minimizing tax liabilities, but it comprises of advising businesses on how tax laws can leave an impact on their business investment possibilities, decisions and financial transactions. Effective tax advisors help in reducing the tax burdens and provide support in compliance, tax structuring, risk assessment, dispute resolution, and fixing international tax issues. Some of the types of tax advisory services include:

• Transaction Advisory: Offering support on mergers, acquisition, restructuring and joint ventures.
• Compliance Advisory: Make sure of timely filing of tax returns, and compliance with legal requirements.
• Risk Management: Offering full help in tax audits, assessment of risks and representation in front of tax authorities.
• International Tax advisory: assist businesses in cross boarder tax regulations, understanding international laws, transfer pricing and treaties.

Objectives of Tax Advisory

• Assuring complete compliance with all legal laws and tax implications
• Minimizing risks that comes with complex tax procedures
• Offering customized solutions to meet the unique needs of each client
• Supporting businesses during merger, acquisition and international operations
• Dealing with disputes, audits and legal laws with proficiency.

Key Differences Between Tax Planning and Tax Advisory

	Tax Planning	Tax Advisory
Goal	Reduce legal tax liabilities	Provide Advice on Tax broader Tax legal implications
Focus	Finding tax saving possibilities	Deep analysis of tax laws and client situations.
Time Period	Performed during or prior to tax year	Doesn’t depend on time and can offer services before, after or during tax seasons.
Scope	Aligning Financial plans and investments	Handles compliance, legal disputes, structuring and taking smart decisions
Users	SMEs, investors and individuals	Large enterprises, corporations and foreign businesses.
Nature	Standardized plans with only required customization	Mostly offer custom made support as per the needs of clients
Results	Less tax payments with legal methods	Better decision and risk minimizations strategies.

Roles and Skills of Tax Planners vs. Tax Advisors

Tax Planners:

• They are normally accountants, financial planners or hired agents.
• They hold a good understanding of deductions, credits and tax codes
• Offer expert insight of financial structures by accessing them professionally
• Utilize the most advanced structuring and modeling tools and software
• Commonly incorporated into individual financial planning

Tax advisors:

• Certified professionals like CPA, ACCA and tax attorneys
• Deeply understands the tax laws, international treaties, and regulatory frameworks.
• Holds experience in accounting, M&A structuring, and compliance guidance
• Work with more professional legal, financial and operational teams
• Offer an assessment of various tax impacts on business

Do You Need a Tax Planner, a Tax Advisor — or Both?

Tax planner and Tax advisor are both highly beneficial for businesses. Now the question arises that whether you should hire a tax planner, a tax advisor or both? It totally depends on your needs, objectives and budget. If you want support specifically during the financial year to save tax liabilities, you should hire a tax planner. They also provide help in your routine financial decisions like investment plans, retirement plans, or choosing a tax-saving instrument. While on the other hand Tax advisors operate as a more trustworthy companion of your team who not just offer help in complex transactions (like M&A, or global expansion) but also aid in dealing with cross boarder tax laws, offering risk assessment and facing tax audits.

Although tax planner and tax advisor both differ significantly. Yet, if you hire an accounting firm that delivers both services it will be fruitful not just in terms of cost, but you will also gain a competitive advantage from both offerings. It helps you in complete compliance, financial structuring, custom made solutions and much less exposure to risks. Tax planners and advisors work collectively to align our financial decisions with long-term success goals.

How to Choose the Right Accounting Firm for Tax Advisory and Planning in Saudi Arabia?

KSA has a dynamic landscape with continuously evolving legal regulations and strict compliance guidelines. Having a tax planner and tax advisor by our side brings great value to your financial and tax services by offering you multiple benefits. However, picking one of the best tax advisory accounting firms can be challenging, you must consider the following key factors:

• Choose a firm with local experience of VAT, ZAKAT, Excise tax and corporate tax regulations and understand the legal procedures of handling ZATCA regulations
• They should be licensed with Saudi Organization for Chartered and Professional Accountants (SOCPA) and recognized by ZATCA as an approved tax agent.
• Thoroughly review their range of offered support like tax planning, tax advisory, bookkeeping and auditing services
• Look for a firm with higher reputation, positive reviews and customer focused, custom made solutions
• They should utilize the most advanced tools and technological solutions that offer automated real time support

SSCO KSA put forward a comprehensive range of services. No matter if you are a startup, expanding globally or going through a financial or tax hurdle we help you safeguard your wealth by reducing risks and taking intelligent decisions. With years of local industry expertise and hundreds of satisfied clients, businesses and individuals can confidently count on us for their tax advisory and tax planning services that are tailored to the Kingdom’s unique tax environment.