A long-established means of increasing commercial profits is to conduct business in ways that eliminate unnecessary taxes. US companies are incorporated in states that do not have a national corporate tax. Those who are willing to do business overseas can do business, and the jurisdiction itself does not tax profits outside its borders. The international re-invoicing strategy used by offshore companies in countries such as Belize or Panama enables legal and profitable business functions without the need to pay unnecessary taxes.
International business company
There are many jurisdictions where companies can register and conduct business globally without paying taxes, as long as the company is not buying or selling in the host country. In order to establish an International Business Corporation [IBC], companies only need to consult with the consultants in the relevant jurisprudence to obtain permits and ensure compliance with local laws. Such companies typically open an offshore bank account that may or may not be in the same jurisdiction. The IBC can be owned by an individual, an individual, another company, or another offshore legal entity [such as a Panamanian private interest company or a New Zealand trust company]. The extent to which principals choose this extended offshore solution is often related to their focus on asset protection and privacy. All aspects of a business enterprise associated with IBC do not have to belong to the same offshore jurisdiction. In fact, they are usually better, they are separate.
Conducting business internally
Manufacturing outsourcing has been going on for decades and is the main reason for the rapid rise of Chinese industry. Companies from Japan to the United States to Germany have outsourced some of their business and manufacturing operations to reduce costs and thereby increase their profits. There is no reason why companies in Belize, Panama or any offshore jurisdiction cannot outsource manufacturing to Asia when selling products to affluent markets in North America, the United Kingdom, and continental Europe. There are differences between companies imported from Kansas City to the United States and companies in Panama City, Panama. Panama-based IBCs typically reduce operating costs based on lower wages. In this case, the company is "outsourcing" and not just the back office! Many offshore jurisdictions are clearly business-friendly, which usually means reducing red tape and thus reducing operating costs. Many offshore jurisdictions meet the loose definition of tax havens. Basically this means they can provide incentives for new businesses, including tax breaks for local businesses and tax write-offs for hiring local workers.
International reinvoice strategy
The focus of the international re-invoicing strategy is to establish business in low-tax jurisdictions. The company needs to be clearly and legally separated from Asian producers and customers in North America or Europe. For example, you can set up a company whose business is to buy clothing made in China. The company will then manage a supply chain with end points in North America and Europe. Through offshore operations, the company's sales profits in these two markets will not be taxed within its own jurisdiction.
A simple example might be that a Chinese high-quality men's shirt manufacturer will sell a shirt for $10 to a Panamanian company. The cost of shipping and distribution to the target market is $10, and the Panamanian company will charge $70 for shirts to its North American or European customers. The cost of selling a shirt is $5, and the retailer will sell the shirts for $100 each. In this example, the offshore company's profit reaches [$70 - $10 - $10] = $50 for a shirt. This will be a clear profit deposited into the company's offshore bank account.
Offshore companies in the United States will buy shirts for $70 each and absorb $5 in shirt costs overhead. Its profit will be $100 - $75 = $25. A regrettable fact of this American company is that any retained profits or profits paid as dividends will be subject to a 50% tax rate first, so profits can be reduced to $12.50 each.
The price will be negotiated by IBC and its customers. Everyone will seek the most profitable way. The obvious choice for offshore companies is to absorb enough of the total operations to accumulate most of the profits, always bearing in mind that offshore entities need to be completely and completely independent of onshore suppliers or customers.
a broader aspect of offshore operations
As we mentioned above, an international business company can be wholly owned by another company or an asset of a foundation or trust. The latter two offer unique possibilities for asset privacy and protection. The Panama Private Interests Foundation has no owners. It has beneficiaries. Similarly, trusts are established to provide trust to their beneficiaries. It may be wise to establish an IBC and its international re-invoicing strategy in another legal tool based on the needs and desires of those who establish offshore asset protection and privacy solutions. This decision is best made in which jurisdictions establish banking, the IBC itself, and the decision of the trust or foundation.
In order to get the best long-term results, the most important thing is to deal with lawyers who cross international borders from the beginning. The best solution for any particular individual may not be in one jurisdiction. People who have experience with people who have no communication problems and who have extensive experience in offshore business, banking and asset protection tools will pay dividends in the next few years.
Orignal From: IBC can increase profits through international reinvoice strategy
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