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Tax planning: |
| Import-export operations are one of the most widespread methods of offshore companies use. It is common to utilize re-invoicing in such operations, that is, underestimation or overvaluation of price (also known as "transfer pricing"). It is applied in order to move the major income, and consequently, the profit, out of a jurisdiction with high taxation level into an offshore zone, or into a jurisdiction providing tax relief. For the purpose of minimizing the taxable profit, an offshore company (intermediate company) gets introduced into the chain of operations between two or more companies. |
| Export operations |
| E.g. a company ABC exports goods to a foreign company at $140 for 1 unit of goods. The profit of the company ABC is $20 per unit. Thus, the company ABC has to pay tax for the profit gained. In such situation, the following decision might be made. The company ABC establishes a firm, incorporated in an offshore jurisdiction (as the firm might have nominal directors and shareholders, therefore, the fact that the offshore firm is affiliated with the company ABC, is almost undeterminable; besides, most offshore jurisdictions have strict laws providing non-disclosure of confidential information on directors, shareholders, and actual owners). So, the export agreement is concluded with such an offshore company and providing $130 price for 1 unit of goods. Thus, the income of the company ABC is reduced to $10. Then, the offshore company sells the goods for $140. The income gained by the offshore company, by virtue of specific tax regulation, is not subject to any tax. The main part of the income is accumulated on the offshore company's account. Besides, an account of such a company might be opened in a foreign bank, providing numerous auxiliary services: remote access, internet banking, etc. Such an account can be managed with a high degree of operational efficiency, which is essential while performing fixed-term payments and commercial operations. Besides, if the company ABC purchases goods in the country of its incorporation for the purpose of further exporting, then the Value Added Tax (VAT) is applied at the moment of buying. While a deal is accomplished on behalf of an offshore company, no VAT is applied. Finally, the offshore company can provide the cargo tracking and its security provision, etc, thus reducing the taxable income of the company ABC. |
| Import operations |
| While performing import operations, this scheme is applied vice-versa. However, a dilemma arises: on the one hand, price overstating of imported goods reduces the income of the company ABC, but, on the other hand, the sum of customs charges grows up. This situation requires certain analytic and arithmetic work, to examine rates of taxes and customs charges. Then, the most appropriate import price is assigned, which will make the maximal economy both on taxes and customs. Besides, reducing customs might be obtained by inclusion into the operational scheme of a company, incorporated in a country with double taxation treaties. The first offshore company supplies the company ABC with goods at the minimal price. Consequently, minimal customs are paid. The company ABC delivers goods to the second foreign company, liable to an agreement on double taxation avoidance. The second foreign company sells the goods at the maximum price, and pays reduced tax in the country of incorporation. Import of services might also be qualified as import operations. An offshore company may provide consulting, marketing, informational as well as educational services to the company ABC. Thus, the company ABC has a legal way to transfer a part of its benefit on the account of the offshore company, and consequently reduce its taxable profit. Onshore companies might be as effective as offshore ones when used in commercial operations (as well as their combinations). Specific attention in this matter is attracted to exploitation of companies, incorporated in Switzerland (Business-Dialog). Let's suppose that a Swiss-based company doesn't perform any deals to its own benefit, but in behalf of another company (e.g. an offshore one), that is, the Swiss company and the offshore one will conclude an agency agreement. Then, by applying such a facility, the taxable income of the Swiss company will be nothing but the commission charge. Its rate is fixed in the agreement between the Swiss company and the offshore firm-principal. Consequently, all the transactions (reception and accomplishment of orders, issue of invoices, accounting, payment receiving, etc.) will be realized by the Swiss company under instructions of the offshore company. In the end, all the income will be collected in the offshore jurisdiction, where it is charged at 0% rate. Besides, business partners, with whom the Swiss company will cooperate, won't have an idea of its intermediary relation with the offshore company. Another fact can be added to all the mentioned above: sometimes and especially concerning certain countries of CIS and/or East, activity on behalf of foreign company can essentially improve one's image. For partners from the West, it is more convenient to have business relations with a company, incorporated in Switzerland. |
| Company formation in Switzerland |
| MB GROUP provides personalized assistance in obtaining authorizations you might need to incorporate your company in Switzerland, negotiating tax arrangements with the Swiss tax authorities and serving as your contact agent for the local government structures. The most attractive cantons of Switzerland – Zurich, Basel, Lausanne, Geneva, etc., as well as canton Zug with its unique tax advantages, are waiting for you. We are here to help you succeed in Switzerland. You can benefit from our experience in setting up foreign businesses and from having to deal with only one representative throughout the entire procedure. |
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| Switzerland at a glance | ||
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| Forms of tax-privileged treatment in Switzerland |
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Text – http://www.taxcons.com
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