How can the tax burden be reduced?
How does an IBC operate?
The importer's case:
If you import using an international business company,
you can move your profit in the offshore jurisdiction
by invoicing and re-invoicing using the IBC (i.e.
the offshore) as middle-man.
Example: Without IBC
• You buy from abroad directly $20.000
• You sell $40.000
• You make profit $20.000
• You pay tax $8.000 if tax rate is 40%
• Profit after tax $12.000
Example: With IBC
• The IBC buys from abroad $20.000
• The IBC sells to your local company $39.000
• The local company sells $40.000
• Profit in your country $1.000
• Tax in your country at 40% rate $400
• Profit after tax in your country $600
• Profit on the IBC $19.000
• If tax rate on the IBC is 0%, tax paid on the IBC
is $0 and after tax profit is $19.000
• Total tax paid in both countries $400
• After tax total profit $19.600
Conclusion: With the
IBC the tax paid was reduced to $400 while without
the offshore tax paid was $ 8.000, thus making a saving
of $7.600.
The exporter's case
As in the case of the importer, an exporter can invoice
through the international business company, thus moving
profits to the offshore jurisdiction.
Example
• Local company exports to the international business
company with a very small profit
• The IBC sells to customer abroad, thus transferring
to the offshore most of the profit
• Tax charged in the high tax country is calculated
at the very small profit shown by the local company,
while the substantial profits transferred to the international
business company, are taxed at 0% tax rate or at a
low rate as the case may be in the offshore jurisdiction
chosen.
The case of the service provider
company
In the case of a business services company, you can
invoice your client for services rendered to him through
your international business company. The offshore
company will use the local company as the sub-contractor
who will carry out the project and the latter will
invoice the former with a lower amount in order to
keep the substantial profit to the offshore entity
which is taxed at more favourable terms than the local
company.
Collection of commissions case
If you receive commissions either abroad or locally,
but you do not wish others to know, then use your
international business company to invoice, or transfer
these commissions. You may also have full secrecy
of the ownership of the company if you so wish.
The case of anonymity
As we have already mentioned above, you may establish
an international business company without revealing
the names of the true owners. In such a case, you
may use in place of yourself as shareholder and director
of the company our employees or nominee companies
to assume the roles of the shareholders and the directors.
For your protection, we provide you a Declaration
of Trust, stating that we hold the shares
on your behalf and a signed but undated Share
Transfer form in your favour transferring
the shares into your ownership.
In some jurisdictions like Cyprus, the prior approval
of the Central Bank is required for a foreigner to
be able to be shareholder in an offshore company;
hence, the true beneficial owners are disclosed to
the Central Bank However, since these jurisdictions
build their reputation on anonymity and confidentiality,
the Central bank does not disclose the information
to any third party or to other countries, except in
the case of criminal acts, such as national crimes,
drugs, terrorism etc
