Recently I was asked “How do I structure the commercial relationship between me and my Offshore Company?
Here’s how the more intelligent/savvy clients manage their financial/billing affairs:
- The client (or his onshore/local business/company) is appointed via written agreement as a Consultant to the IBC
- The agreement sets out what fees the Consultant is entitled to claim each month/pay period and what expenses the Consultant is entitled to be reimbursed for
- In the month/period prior to billing the Consultant (or his onshore business/company ie whoever has been appointed as Consultant to the IBC) pays all expenses incurred with respect to supplying the Consulting services (ie/eg including rent, travel, internet, phone, IT costs, stationery supplies, license/govt fees etc as applicable)
- At the end of the month/billing period the client (or his onshore business/company as the case may be) invoices the Offshore Company (a) seeking reimbursement for expenses it has paid in connection with supplying the Consulting services) + (b) for Consulting fees as agreed.
Yes you could use the IBC’s Debit/Credit card to cover those expenses but that may not be the wisest choice. With current technology you can’t assume that local tax authorities will not notice if you use, onshore, a debit or credit card issued by an Offshore Bank.
Most clients usually only use the Offshore Company’s card purely for business/company expenses or when they are outside the country of tax residence (though technically even such withdrawals/payments, unless spent on business expenses, would be classified as “income” declarable in the country where you are resident for tax purposes).