How Rich People Pay No Taxes
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| How Rich People Pay No Taxes Poster |
Ambani Draws 0 Salary From Reliance.
Many billionaires follow the same route, the reason being:
Smart Understanding of Money.
The Rich are Rich not just because they know how to make money.
They know how to use that as leverage.
PS: I have posted another note covering all key doubts on this.
Check it out if you have more questions :)
Let me break it down:
[1] Every big founder owns a major stake in their company.
>> And this is through equity in that company.
Now as we all know these are not liquid until you sell off the stocks (except for dividends).
[2] But if you do, there are 2 issues:
>> You pay capital gains and income tax on it.
>> It looks bad for the company if the owner sells the stake continuously.
[3] But they have one option.
>> To borrow against their shares.
This simply means using these shares as collateral.
>> This way you are not taxed.
Since you are working with Debt.
[4] In an ideal situation.
>> Their stock price can go up, even faster than the loan rates.
>> Plus they have easier access to debt (at better rates).
So they can always use more Debt to pay off these loans.
[5] The core principle is that they will always be remunerated through shares and stocks.
>> And this is NOT WRONG.
>> It's just being smart with the cards you have been dealt.
[6] On top of this, almost everything can be offset as expenses for them.
>> Businesses have the leeway to offset their revenue before they declare profits.
>> Whereas Individual Salaried Class pays Tax Deducted at Source (so we have no such exceptions).