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Trading Companies

An importing or exporting company might establish itself in an offshore area. The offshore company would take orders directly from the customer, but have the goods delivered directly to that customer from the manufacturer or place of purchase. The profits arising out of the difference between purchase price and sales price would then be accumulated in either a tax free or low tax area. With such trading companies, it is important to choose an offshore area which has good communications as shipping and other documentation may be critical to the structure.

Tax Planning Consequences

It is important to note that you cannot simply open up an offshore trading company and “pretend” to make money offshore. Any income made would have to be actually “sourced” outside of the United States (either through the IRS tax sourcing rules, or various tax treaties) to receive tax beneficial treatment. In addition you must make sure that your structure does not run afoul of the IRS Controlled Foreign Corporation Laws.

 

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