The importance of tax planning for internet service providers (ISPs)

We're back to stating the obvious. That is, talking about the importance of tax planning for internet service providers (ISPs) is, in fact, another obvious point. However, it's like the phrase by Clarice Lispector, in * Uma aprendizagem ou o livro dos prazeres* (An Apprenticeship or The Book of Pleasures ): " the obvious is the hardest truth to see" .

After all, owners and managers of internet service providers (ISPs) know very well ( or should know! ) that the financial viability and economic sustainability of the ISP business model depend heavily on the tax optimization that Value Added Services (VAS) provide .

You've probably already read this in some of our articles about VAS for internet service providers. However, it's always good to reinforce that a large part of ISPs' profit comes from VAS . This fact proves the importance of tax planning for ISPs.

And, above all, it demonstrates the greatest of the many benefits of all VAS for ISPs : that tax planning for providers is fundamental and is based on the strategic utility of VAS for internet providers .

Tax planning for providers and VAS (Value Added Services).

Before we proceed with more information on the importance of tax planning for ISPs, I would like to do as the famous English-Indian writer George Orwell did: " state the obvious" and emphasize the importance of VAS (Value Added Services) for ISPs .

Without a doubt, experienced ISP entrepreneurs and managers understand the true scope and importance of value-added services for their business model .

That's why, on the Lumin blog , we've been featuring articles about the advantages, benefits, and relevance of VAS (Value Added Services) for internet service providers .

Without a doubt, knowledge and information are essential for improving ISP management. And, as a result, generating more profit, security, and control over the internet service provider business .

If you missed any of our most recent and relevant content about the strategic value of a Value-Added Service (VAS) for internet service providers , before we delve deeper into the importance of tax planning for providers, take a look at our blog:

Tax planning for providers

When it comes to tax planning for internet service providers, there's no escaping VAS (Value Added Services ). After all, they are exempt from ICMS (Brazilian state sales tax) and represent a significant tax reduction.

According to tax planning for providers, this can mean between 20% and 50% less, just in ICMS (Brazilian state sales tax).

Undoubtedly, the tax savings achieved through VAS (Value Added Services) for providers are more than relevant for increasing ISP profitability.

So, when reducing the tax burden and improving profitability are the focus, then VAS (Value Added Services) for internet providers are undoubtedly indispensable!

Surprisingly, market data indicates that the vast majority of ISP owners and managers are unaware of the advantages and benefits of VAS (Value Added Services) solutions for internet service providers .

Watch this video by Stanley Sousa , the accountant responsible for Contare Contabilidade – Soluções Contábeis & Empresariais.

In four minutes, see what he says about the importance of tax planning for providers and how the vast majority of his clients were paying more taxes than they needed or should have .

The Lebanese poet and philosopher Khalil Gibran once said: " The obvious is what no one sees until someone expresses it simply .

That is why we insist on reinforcing the strategic mandatory inclusion of VAS (Value Added Services) in tax planning for providers .

As obvious as it may seem, the importance of good VAS (Value Added Services) solutions for internet providers .

However, other strategies and specific financial and economic characteristics of internet service providers can also contribute to further maximizing the results of tax planning for providers .

Tax planning for internet service providers goes beyond VAS (Value Added Services).

Anyone who truly understands the internet service provider (ISP) business knows very well that more Value Added Services (VAS) means less tax .

Moreover, he knows even more: that tax planning for ISPs goes far beyond VAS (Value Added Services) .

The significant tax reduction that a Value Added Service (VAS) for internet service providers offers is necessary and strategic . However, sound tax planning for providers should be pursued to ensure even greater tax savings .

As a result of these tax savings, we have the great quality and benefit of VAS (Value Added Services) for internet providers: increasing the profitability of internet providers .

Simply put: the more VAS (Value Added Services), the lower the taxes and the higher the profit.

That's why value-added services like Lumiun ISP are so important to the business model of ISPs.

Tax avoidance and tax planning for providers.

The importance of sound tax planning for internet service providers (ISPs) lies primarily in making the most of the incentives offered by the General Telecommunications Law ( Law No. 9,472/1997 ) .

In other words, in simplified terms, tax planning for service providers should find legal ways to pay all taxes, but as little as possible and in the most advantageous way possible .

In other words, technically, tax planning for providers seeks to reduce the tax burden by omitting the tax-generating factor . This practice and strategy has a name: tax avoidance .

Basically, among the three main measures most common when discussing tax planning for providers and tax avoidance, two of them present advantages and benefits of VAS (Value Added Services) for ISPs .

By reducing the tax burden, the tax avoidance strategy adopts measures such as:

reduce the tax base (SVA for provider),
Avoid triggering the tax-generating factor (SVA for provider),
Extend deadlines and postpone tax payments without penalties.

In addition to tax avoidance, tax planning also addresses issues such as:

the tax rate applied in each state,
the qualification of ISP management,
of good VAS solutions for internet providers, and
Maximize the results of tax planning for providers.

Tax planning tips for providers

#1 Information and self-knowledge are essential

Knowing your company and your business is an obligation for every internet service provider entrepreneur, but especially for ISP managers. Knowing exactly the economic, financial, tax, and operational situation of the provider is a sine qua non for the success of any management process.

#2 Professionalize tax planning for providers

Again, it seems obvious that tax professionals specializing in ISPs are better positioned to successfully implement tax planning for providers. Unless your provider has lawyers and accountants specializing in tax avoidance for ISPs. Otherwise, don't fall into the trap of trying to save money or create a tax-saving strategy on your own . Hire experienced and trustworthy professionals to share their information and build a sound strategic plan for providers.

#3 Tax avoidance is not tax evasion

There are many exceptions provided for in the Law and Regulations. Don't fall into the temptation of excess. After all, good tax planning for providers is about saving on tax payments in the short, medium, and long term. That is, depending on your objectives and goals and the many variables involved, several strategies may be suitable. This is why professional, reliable, and experienced tax planning for providers is so important. Often, it is strategic not to exceed or abuse tax avoidance, lest it appear to be tax evasion… An important precaution, especially when we know the voracious tax appetite of the Brazilian state, at all levels.

#4 How to compensate directors

Beyond the VAS (Value Added Services) for internet providers, the remuneration of owners, partners, and directors is a relevant issue to consider. Typically, the suggestion is to change the payment method from a pro-labore (owner's salary) to profit withdrawal . Thus, in a tax avoidance process, good tax planning for providers saves company resources destined for income tax and social security contributions, for example.

#5 Reaffirming the obvious: the importance of VAS for ISPs

It couldn't be otherwise. While other strategies can and should be the focus of good tax planning for ISPs, Value-Added Services (VAS) for internet providers are unbeatable . After all, they are exempt from ICMS, the tax that most impacts ISPs. In short, the tax optimization that Value-Added Services (VAS) offer is often what enables and sustains the business model of internet providers.

A good VAS solution for internet providers.

Lumiun ISP is a VAS (Value Added Service) that undeniably generates competitive advantage , differentiation , and benefits for internet providers and their customers.

The Lumiun ISP DNS filter in SVA format for internet service providers was developed to offer greater security and control over the subscriber's internet connection and increase the profitability of internet service providers (ISPs).

In conclusion, the Lumiun ISP is a solution that delivers high quality, innovation, and significant benefits . After all, it was developed to generate competitive advantages and strategic differentiators.