Offshore corporations explained

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Offshore corporations in a changing offshore world. Alternative tax havens and offshore strategies. Offshore corporations in a changing offshore world. Alternative tax havens and offshore strategies.

Offshore trading:
Keep it low profile

Offshore trading company:
Guilty by association?

Offshore trading company:
Guilty by association?
Low profile & low tax:
Strategy example
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(Part 1 of 2)

Trading through an offshore company can cut your tax bill. But will you have anybody to trade with?

with Peter Widder

Confidentiality is a primary concern of many offshore practices, particularly asset protection.

When it comes to utilising an offshore company for trading however, a whole new category of priorities must be considered. These are the priorities of your trading partners and the attitude, outlook and sophistication of onshore authorities.

Today legality and appearance -- and not reliance on the grey-area laissez faire and ignorance of yesteryear -- are the essential requisites for the offshore entrepreneur.

Gone are the days of the businessman who carelessly slapped his Panamanian letter-box company down in the middle of a business transaction and raked off a share. These days, such sloppy schemes can lead to a spell raking the leaves in a prison yard.

Genuine transactions or
false invoicing?

In many circumstances, it is not desirable to raise invoices in the name of an exotic offshore company, nor is it possible to ask your offshore company's clients or trading partners to make payments to a bank in an obvious offshore tax haven.

Remember that the books of your customers or trading partners are open to scrutiny by their local tax authorities and dealings with offshore havens -- even though legal -- are viewed with scepticism, if not suspicion.

Tax authorities of high-tax nations are aware that offshore companies can be used for illegal tax evasion by businesses that need to "reduce" their taxable profits before year-end. After all, the ownership of an offshore company is difficult and often impossible to establish. This allows dishonest business owners to incorporate a company in an offshore haven and use it to siphon money offshore, usually by having the offshore company raise invoices payable by the onshore business.

Consequently, trading directly in the name of a tax haven company can cause loss of business as many prospective customers feel uneasy about being wrongly suspected of participating in such false invoicing schemes.

In many developed countries, tax authorities do not even allow or recognise payments remitted to companies based in offshore tax havens. This reflects the opinion that anyone entering into a transaction with an offshore company is not doing so out of genuine commercial need, but solely for reasons of tax mitigation -- if not tax evasion.

Of course, there are times when an offshore company can be used to close a one-off deal if both your trading partners and the relevant tax office feel happy about the arrangement. But entering new markets or marketing products or services to unknown customers under the name of Tropical Island Trading Corp., incorporated in the Turks & Caicos, is a tall order nowadays -- unless, of course, you really are exporting conch shells or lobster.


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