International trading is the purchase of goods in low cost production countries e.g. China, India, Thailand etc. and selling them to distributors in high income market areas e.g. USA, Europe, Australia etc., where the actual trading operation may take place from a third country. The goods bought by the trading company are sent directly from the country of origin to the country where they are to be sold.
Many individuals engaged in providing services in construction, engineering, aviation, computer, finance, film and entertainment can achieve considerable tax savings via an offshore-based private company. Individuals receiving consulting income can be employed by a company incorporated in a low or no tax jurisdiction and the fees generated will flow into this company. The offshore company can contract with an individual to provide him/her with services outside his/her normal country of residence and personal income can be accumulated free from taxation in the offshore centre.
Both individuals and large companies regularly use offshore companies as vehicles to hold investment portfolios, which may consist of cash, stocks, bonds and other investment products. Cash assets held by offshore companies can earn deposit interest gross or can be placed in collective cash funds.
Another form of offshore holding company that has gained a lot of interest and popularity in recent years is using a company to hold property and property rights in an offshore location. Such companies are used to avoid capital gains taxes on property when it is sold, as well as inheritance taxes. This type of structure also provides privacy which ensures tenants are unaware of the property owner’s identity.
Offshore finance companies are normally established for the purpose of inter-group treasury management. Interest payments from group companies may be subject to withholding tax, but these taxes differ from the standard corporation taxes. Many large companies establish their own offshore companies for the purpose of mixing dividends of subsidiaries and deriving maximum advantage from tax credits. The interest paid can be a deductible charge for taxation purposes, thus consolidating interest payments in an offshore finance company provides a tax saving.