Offshore companies have long established themselves as an effective lever for gaining access to international markets. Registration of a company in a zero taxation zone is actively used today in order to open corporate bank cards, preserve and increase assets, keep the identity of the true owner a secret and many others.
The use of offshore companies has become especially popular in import-export operations. It allows you to optimize taxation, including VAT, as much as possible.
In international trade, an offshore company is a kind of "pillow", an intermediary between a local company and its foreign partner. An offshore company makes possible tax deductions and allows you to minimize the cost of transporting goods. Within the framework of this scheme, it is possible to change the prices established by the contract, for example, to increase the cost of goods imported into your country in order to reduce the profits of your local company.
The purpose of such operations is to preserve capital, minimize the income of your local company and concentrate most of the income in jurisdictions where there is no taxation or where it is levied at a reduced rate.
However, do not forget that this business system is not devoid of risks: an excessively understated value of goods will lead to the need to pay income tax in your country, and an overpriced price threatens inevitable collection of import duties. Therefore, the selection of the optimal cost of goods is an important stage in the import scheme using an offshore company.
There is also a risk that the manipulation of contract values will attract the attention of the relevant authorities exercising control in the field of financial transactions. The use of an offshore company is possible even if the purchased goods are planned to be exported. If the purchase of the product is made in your country, payment of VAT will be a prerequisite. If the purchase of goods is made to an offshore company, no VAT will be charged. In addition, the ability to conclude an agreement with the offshore zone on the protection and escort of cargo will additionally write off expenses from the profit of your local company.
Offshore company and VAT
In the process of export, an offshore company can participate in the so-called reinvoicing (understatement / overstatement of the price of goods). An offshore company, acting as a buyer, purchases goods at the lowest price, after which it resells them at a different price, set by the market. The difference resulting from the transaction is accumulated in the form of cash in the tax-free offshore zone where the buying company is registered.
Another scheme that allows you to significantly reduce tax payments and optimize VAT is the purchase of goods in order to contribute them to the account of the authorized capital. The principle of operation is as follows: an offshore company becomes the founder of a local company and pays for its authorized capital with goods from which, in accordance with the local tax legislation, neither taxes nor customs duties are levied. The result of such a scheme is saving on import duties and VAT when importing goods into your country.
A significant advantage of using an offshore company when importing and exporting goods can also be called the possibility of making urgent payments. An offshore bank account provides prompt cash flow, instant transfers. The use of a local account cannot provide a client with such a speed, due to the peculiarities of the work of local banks and the currency control system.
Have we managed to convince you that offshores can help you legally avoid burdening business taxations? If so, feel free to contact our team right away and start your own offshore company ASAP!
