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.