Anyone who has ever been in business knows that it’s all well and good to have a great product but unless you can introduce the product (or service) to people or businesses who might want to buy the product (or service) you’ll wind up going bankrupt very quickly.
Once way to generate sales is to approach qualified leads direct, ie persons who you know for sure might be interested in buying or who would definitely have need to buy a product like yours.
So how do you generate these leads?
Data mining is often the answer. That is you search the nett for persons or businesses who you know have regular need of such product.
There are specialized business on the nett who will do this for you. That is there are firms who will find qualified sales leads for certain product or services and then either sell the prospective client list (ie an entire database including names and contact details of prospects/leads database) to you or they will allow you to utilize the data (ie to connect with the qualified leads) and then charge a percentage or fee for each sale generated by the provision of the qualified lead.
If you are in the business of datamining or lead generation you’ll be pleased to know that such a business lends itself well to an “Offshore” Corporate structuring Plan.
In principle here’s how it can work:
- An offshore company (commonly an International Business Company “IBC”) is incorporated in a country that either has no Company tax or which has a territorial tax system (ie it only taxes income sourced inside the country of incorporation.
- The Company would be seen to managed and controlled from Offshore (ie the Company’s Director/s would be based in a zero tax jurisdiction)
- You design a website to be the shopfront of your business
- Given that sales leads and databases can be supplied by way of soft files there should be no need to have any physical store or office. That is your business will be web-based.
- The IBC owns/operates the web based business (eg ownership of the web-domain and the website/artworks or trademark/s or any sole distributor rights are held by or transferred to the IBC)
- An Offshore account (which received payments via a merchant account) is set up in a nil tax banking centre
- Ideally the server is located in a country which does not share data or tax business on the basis of server location (eg Iceland).
- Your product is offered and marketed online. Customers find you on the internet.
- Your terms and conditions (ie your customer contract or order form) would/should have special clauses included noting that the situs of the contract is “Offshore”. Simply put you would have special terms providing that the bargain has been struck “Offshore” (ie in the nil tax jurisdiction/s wherein the Company’s Director/s is/are based)
10.Customers order your services online and contract with and pay the IBC. The Services are delivered via the website or via your website’s domain email account/server
11.All monies generated from such sale are banked free of tax in the first instance.
12.You or your local company could/would be contracted by the IBC to manage sales/delivery of product/website maintenance/whatever.
13.You would invoice the IBC periodically (eg monthly) for this service which income would be assessable income in your home state – though a smart Tax Accountant should be able to assist you to claim a series of expense against this income (eg home office, equipment, travel, phone/internet/utilities etc) to significantly reduce the amount of tax payable on this income.
14.Often there is some kind of intellectual property (“IP”) created or behind the website based business (even if it’s just the website/design). It may be advantageous to you down the track if ownership of the business and the IP were held by 2 different entities. What you can do there is set up a 2nd IBC to own the IP. The first IBC (ie the Trading Company) pays license fees periodically to the 2nd IBC which fees wold be receipted tax free. This could be advantageous if you wanted to bring ownership of the web-business onshore or if you wanted to sell the business but keep a passive (potentially tax free) income stream
15.Ideally once you start to grow you and to add substance you would be wise to set up your MD/Board and or a sales team onshore to take orders and receive income in a low tax onshore environment (eh Hong Kong, Ireland, Singapore, Cyprus etc as per the Amazon/Google model)
To minimise the chances of the IBC being taxed onshore ideally the IBC should be (and be seen to be) managed and controlled from offshore. How this can be achieved is including a Nominee Director etc as part of the Corporate structure. See this page for details of how that can work:
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