Offshore import scheme

Most companies in jurisdictions with a low tax status, and in particular offshore ones, are involved in the organization of import operations. With the development of a market economy in the early 1990s, schemes for minimizing the tax burden, which have been used in the West for a long time, began to actively enter our lives. But if in those years any "shadow" options for such activities, then with the strengthening of control over offshore zones at the international level, such companies have practically disappeared. However, this does not mean that today it is impossible to use them in planning your business related to foreign economic activity — it's just that the ways of working require serious knowledge of offshore legislation and require careful individual analysis.

The usual scheme for using offshore when importing

Domestic Enterprise

The importer, instead of buying goods from the manufacturing company, purchases it from the offshore company that bought it – at a higher price. The importer imports products into the territory of Ukraine, while paying rather high customs duties, as well as VAT, and then sells the goods to end consumers. The markup is minimal, the profit is also insignificant, and it is from it that taxes are paid on the territory of Ukraine, and the bulk of the profit is accumulated on the accounts of an offshore company.

Moreover, between the offshore company and the manufacturer of goods, additional companies registered in other jurisdictions are often included — both offshore and onshore. And in most cases, this is due to the direct requirements of the manufacturing company, since at present direct transactions with offshore companies often attract excessive attention from the fiscal authorities.

Therefore, an agency agreement is involved in the organization of imports. As a rule, the jurisdiction for registering an agent company is selected depending on the location of the – seller or manufacturer — both the EU and Asia. You should pay special attention to where the seller is registered and what requirements he imposes on counterparties. However, an important point is that it is not at all necessary to focus, as in most cases, on a jurisdiction that has with Ukraine (such as Cyprus) an agreement on the avoidance of double taxation — in this case we are talking about imports, and such an agreement does not matter.

The principle of operation is almost the same as the usual scheme without the inclusion of an agent enterprise. The Ukrainian company-importer sells the goods with a minimum markup, and thus the profit received in Ukraine is minimized, and you have to pay tax from it here. And the bulk of the profits again manage to be withdrawn from taxation and accumulated in an offshore company. An even more successful option would be to use an importing company in Ukraine, which is the owner of benefits for paying VAT and customs duties.

Because trading schemes with foreign partners, especially those with offshore status, are carefully reviewed by the tax authorities for transparency, we advise you to approach the development of import transactions with the utmost care and always enlist the support of experienced lawyers.