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It is very common using low-tax jurisdictions as trading arm in which part of the profits of the operation can be realized in a low-tax jurisdiction. Even if the process takes place wholly in one high-tax jurisdiction, it may be possible to separate the 'selling on' part of the process from the 'making and procuring' part, and send it offshore, particularly now that e-commerce infrastructure is available in many IOFCs (International Offshore Financial Centre).
The eventual value of having an offshore trading company will depend on the overall corporate structure, and on the particular country or countries in which the owner resides. To get the best result, it will normally be good for the offshore company not to be a controlled subsidiary of the main company; and it will normally be even better if the main shareholders are not resident in the same country as the main company; but even if these conditions are not fulfilled, there is much that can be achieved.
Here are some examples of business situations in which an offshore trading company can help to reduce tax: 1. An international engineering personnel agencygives up its EU office and moves completely to an offshore jurisdiction. Its own profits and those of its free-lance staff become untaxed (staff may choose to remain in a high-tax area. They have a choice to stay in a low tax jurisdiction if they want). 2. A publisher in the EU retains his editorial staff there, but sets up a separate offshore sales and distribution company to handle the rest of the process, and make most of the profit offshore. 3. An EU automotive component companysets up an independent offshore company to purchase Chinese parts and sell them on at a profit to the EU company, which builds them into assemblies, adding further value (which will be taxed in the EU).
VAT can be reduced or avoided if products or services which can be delivered over the Internet.
It is worth noting that some IOFCs actively encourage trading operations by offering duty-free zones, or warehousing facilities. This can be particularly important when attempting to avoid the creation of a 'permanent establishment' in the destination country (eg for the storage of goods before delivery) which could compromise a company's offshore status.
The choice of an offshore jurisdiction for trading purposes will depend on a variety of factors as below:
1. confidentiality 2. fiscal suitability 3. effectiveness of local banking and commercial services 4. modern telecommunications and e-commerce infrastructure 5. availability of duty-free zones 6. ease of establishment of offshore entities 7. good transport links 8. availability of skilled local labour 9. ease of obtaining entry and work permits 10. proximity to markets 11. local cost levels
It is difficult to recommend suitable IOFCs, but here is a list of some IOFCs with good, broad infrastructure and which meet many of the criteria above:
Bahamas, Barbados, Bermuda, British Virgin Islands, Cayman Islands, Costa Rica, Cyprus, Gibraltar, Ireland, Isle of Man, Jersey, Luxembourg, Malta, Mauritius, Panama.
If you want to know more, please do not hesitate to contact us:
Whatsapp : (852) 6499 4686 Phone : (852) 2186 6936 Email : info@intershores.hk
Disclaimer: Whilst reasonable care has been taken in provision of information above, it does not constitute legal or other professional advice. INTERSHORES does not accept any responsibility, legal or otherwise, for any error omission and accepts no responsibility for any financial or other loss or damage that may result from its use. In particular, readers are advised to take appropriate professional advice before committing themselves to any involvement in jurisdictions, vehicles or practice. |
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