International trading company

The illustration below is an example of a situation in which the owner of an international trading business may wish to register a company offshore in order to maximise profits by taking advantage of lower taxes.

In an international trading operation, the business buys goods from a supplier in one country and sells them to customers in another country. For example, it may buy toys from China and sell them in Italy, while the business owner lives in a third country. When a businessman identifies an international trading opportunity such as this and decides to pursue it, he will typically register a company in his country of residence and conduct the business through that.

Let us assume that the cost of a particular toy from China is $5 and the business manages to sell it in Italy for $35. This generates a profit of $30. The company will then pay tax on this profit at the applicable rate of tax, which could be anything up to 30% or even more. If the tax rate is say 30%, then the company will pay $9 in tax and be left with a net profit of $21.

This is a typical situation in which it makes sense to register a company in an offshore jurisdiction, as this can result in substantial tax savings.

Let us compare the example above with an alternative scenario, in which the business owner chooses to register a company offshore instead of using a local company.

The offshore company will again buy the toy for $5 and sell it for $35, generating the same profit of $30. However, as the offshore company will be registered in a jurisdiction where no income tax is payable, the offshore company will retain the full $30 of profit. The $9 of tax is completely avoided. In this example, the increase in net profit from $21 to $30 represents an increase in the overall profitability of the business of 42%!

There is no need for the physical shipment of the goods to pass through the country in which the offshore company is based. Instead, the toys will be shipped directly from China to Italy, in the same way as when a local company was used.

There are several jurisdictions around the world where it is possible to register a company which is tax exempt. Some examples are  Belize, the BVI and Nevis, to name just a few. If this type of offshore company is appropriate for your needs, then all you need to do is click on the button below. You can register a company and be up and running in no time!