International Trading Company

If a firm has significant business in a third party jurisdiction it is often possible to reduce the overall tax position by transferring management and control to a more tax efficient area.

An importing or exporting company might establish itself in an offshore jurisdiction. Companies engaged in international trade may well use an offshore company to take orders directly from the customer and arrange for delivery to be made from the point of manufacture or purchase. Profits on the transactions may thus be accumulated in the offshore company in a tax free or low tax area. With such trading companies, it is important to choose a jurisdiction that has good communication infrastructure as documentation may be critical to the arrangement.

Certainly it is important for any investor in that situation to seek onshore advice on tax legislation from an expert in the onshore country to ensure that all local laws are complied with, as the taxing of offshore activities varies from country to country.

Transferring funds to a low tax jurisdiction may enable a company resident in a high tax jurisdiction to compensate for trading losses through a company incorporated in a low tax jurisdiction.

Offshore structures may be very useful in the case of bulk purchasing: a group of associated companies can benefit from reduced administrative costs, and an offshore structure is more tax efficient than an onshore entity.

Internet trading often requires a secure merchant account for credit card transactions and sometimes storefront software; click on the Worldpay link for more information on both.

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30/09/2006
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