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How to Use an IBC/Offshore Company

Admin Manager — Fri, 21 Aug 2009 09:41:29 +0000

An offshore company is a perfect way of reducing taxes.

1:- In the following case study a UK based company ‘UK Importer Co’ (an electrical goods imported and re-seller) is buying 1,000 TVs at £100 each, directly from China and selling to consumers in the UK at £200 each, thus making a profit of £100,000. The corporation tax on this would be 28% = £28,000

However the incorporation of an offshore company in Cyprus can reduce the corporation tax liability for the UK importer & re-seller.

2:- The China supplier sends the invoice for £100,000 to the Cyprus Company.

3:- The Cyprus company ‘re-sells’ the goods to UK Importer Co by issuing a sales invoice for £150,000 (£150 per item) and the goods are shipped direct from the China supplier to the UK importer.

4:- The UK importer buys the 1,000 electrical goods at £150 each but sells them at the original price of £200 so the profit for the UK Importer Co is reduced to £50,000. The UK corporation tax = £14,000. Cyprus Corporation tax is 10%, so the Cyprus corporation tax = £50,000 x 10%) = £5,000.

In this single transaction the tax burden was reduced from £28,000 to £21,000 creating a saving of £7,000

Contact YourBooks today to order a Cyprus Company from just €700

SIZE DOES NOT MATTER: Small business can enjoy the same tax planning as big business

Admin Manager — Fri, 21 Aug 2009 07:59:52 +0000

UK individuals who do not declare income that is held in foreign bank accounts are breaking the law. Her Majesty’s Government recently paid £100,000 for information about Liechtenstein bank accounts held by UK individuals.

However, the same does not necessarily apply to UK companies: Some of the UK’s biggest companies use complex and secretive but perfectly legal tax plans to limit the tax they pay.

Some companies will simply shift the management and control of the business to a low-tax country, however others adopt a different approach:

Diageo plc (UK drinks giant) transferred ownership of brands including Johnnie Walker and J&B to an off shore subsidiary virtually tax-free. It pays UK corporation tax equal to about 2% of gross profits.

Two major drug firms have shifted ownership of their brands to tax havens. Their UK operations can then be made to pay royalties for the use of the trademarks, reducing the “UK profit” and thus the amount of UK tax.