Offshore tolling scheme

Work on tolling schemes for a non-resident's company

For many years, most CIS countries have actively involved schemes to reduce business taxation with the help of the so-called. tolling operations – for the processing of tolling raw materials. In Ukraine, they are especially popular in the agro-industrial complex, oil refining, textile and footwear industries.

Operation with give-and-take raw materials is an operation for the preliminary supply of raw materials for their subsequent processing into finished products, provided that the cost of give-and-take raw materials at each stage of processing is at least 20% of the total cost of finished products (Law "On operations with give-and-take raw materials in foreign economic relations" dated September 15, 1995 N327 / 95-BP with amendments and additions).

Tolling is considered raw materials (materials, products) transferred by their owners to other organizations for processing without payment. English "tolling" can be translated as "payment for services for the processing of customer-supplied raw materials and materials by themselves." In a broader sense, tolling operations are a way of organizing the processing of tolling raw materials and, after processing it, the sale of products made from it, as well as payments for it.

Tolling schemes

It follows from the tolling agreement that raw materials imported into the country for further processing, firstly, are not subject to customs clearance, and secondly, are not taxed. During customs clearance by the Ukrainian contractor, the import cargo customs declaration simply puts the mark "tolling raw materials". Payment of import duties, taxes and fees is made by the Ukrainian contractor by issuing a promissory note or a written obligation of the STI with a maturity of not more than 90 calendar days from the date of registration of the declaration. When the finished product from raw materials supplied by a foreign customer is exported outside of Ukraine, the promissory note is repaid. When exporting finished products, they are not subject to taxes and fees that are usually levied on export, and are also not subject to licensing and quota regimes.

The scheme works as follows: a foreign company (for example, Hong Kong or Cyprus) purchases raw materials from a Ukrainian company, which is sent to a Ukrainian processor, who, at her request, produces products from it and receives remuneration for this - usually only to cover production expenses (payment for energy carriers, salary payments). After that, such products are sent to a third Ukrainian company, with which the company from abroad has an agency agreement. An agent company from Ukraine sells products, and sends the proceeds, minus its remuneration, to a foreign partner. Although all activities for the production and sale of products are carried out on the territory of Ukraine, a foreign company manages the process and makes payments.

This method of tax optimization is very effective for enterprises engaged in the supply of products from imported raw materials for export. The manufacturer does not participate in the sale of final products and pays minimal taxes. And the supplier of raw materials receives the main profit, and that is why it is desirable to register it in a jurisdiction that has a preferential tax regime. In the event that the manufacturer himself exported raw materials, all the profits received by him would be taxed on the territory of his country, and in Ukraine these are substantial amounts.

Tolling production

From the point of view of optimizing tax payments, the tolling scheme is equally attractive to both processing enterprises and owners of raw materials. The former reduce the tax base for a whole group of taxes: income tax, value added tax (VAT), turnover taxes, and the owners of raw materials have even more significant benefits.

We will always help you choose a partner for your company from the most acceptable country in terms of tax legislation or we will offer to register your company abroad in order to reduce the taxation of business in Ukraine.