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Company Case Studies |
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Yuri Ivanov lives in
Russia. He is purchasing and selling shoes. He buys the shoes from
Italy and sells them to department stores in France, Germany and Spain.
Mr. Ivanov wonders whether he can structure his business in a tax-effective
manner, for example by using an offshore company.
Suggested
solution:
Mr. Ivanov can set up a trading company in a low tax country, thus
ensuring that his trading profits will not be taxed in Russia (his
country of residence), nor in France, Germany or Spain (because the
tax authorities argue that he has a taxable presence in these countries).
As all the transaction concerned are European Union transactions,
Mr. Ivanov must obtain a VAT registration. A good location for conducting
trading activities where one can obtain such a registration is the
Isle of Man. Thus, if such an Isle of Man company intends to ship
the shoes from Italy to Spain, the Isle of Man company would inform
the Italian company of its VAT number, so that the Italian Company could zero rate
its sales invoice. The Italian company does not have to charge VAT
to the Isle of Man company. The Isle of Man company would then obtain
the Spanish company's VAT number and subsequently issue a zero rate
invoice to the Spanish company.
For setting-up the Isle of Man company, there are a couple of possibilities:
an LLC (taxed as a transparent entity, so effectively no tax in the
Isle of Man on the profits obtained) or a resident company.
An LLC distributes a share of profits and there is no withholding tax thereon. An Isle of Man company is not
required to withhold tax on dividends
where its owners are not resident in the Isle of Man.
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