How to increase the cost

If as a result of a transaction the organization does not want to declare too high a profit, there are ways to visually increase the cost of goods. How can I do that?

Instruction manual

1

If, for example, you decide to change the supplier to one whose prices are much lower, and you don’t want to pay the extra income tax, increase the cost of goods on paper by changing material costs: increasing freight costs or increasing labor costs. In this case, the external difference between the former and the present profit will be insignificant and the issue of taxes will not arise.

2

If, for example, a product is purchased at a very low price, and you want to sell it at market prices so as not to cause suspicion among future customers, increase the cost of production by allocating amounts to social funds and transportation costs. After increasing the cost in this way, the profit may be less, but an unreasonably low price will not make you doubt your honesty.

3

The increase in cost is also beneficial if your company is a subsidiary. Large production costs lead to an increase in financial flows from the owner-investor, and this is a chance to increase their own income. Effective ways to increase costs are to increase other expenses (consulting and agency services), increase salaries to employees and administration, and purchase more expensive raw materials. A skilled accountant can significantly improve the well-being of your company, but still try to be moderate.

4

Please note that all such actions are contrary to the Tax Code of the Russian Federation and may lead to complications in relations with law enforcement agencies, in particular, the department for combating economic crimes. Try to achieve your goals as legitimately as possible, not chasing excess profit. Sometimes it’s better to lose a small amount than to be a defendant in a criminal case of malicious tax evasion.