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Re-invoicing is the use of a offshore corporation to act as an intermediary between an onshore business and his customers outside his home country. The profits of this intermediary corporation and the onshore business allow the accumulation of some or all profits on transactions to be accrued to the offshore corporation. Similar structure can be used also by an importer.
An corporation in high tax jurisdiction sells $500,000 of goods or services to Germany normally every year. Let say that cost of goods and operating expenses are $300,000. corporation in high tax jurisdiction earns $200,000 on its sales before taxes. Taxes will average say $80,000 thus reducing net profits to $120,000. Let say that company from high tax jurisdiction establishes a offshore company to act as intermediary. The onshore company sells its goods and services to the offshore company for let say $320,000. This company immediately sells the goods and services to the German client for $500.000. The offshore company earns $180,000. Offshore corporation pays no taxes so $180,000is net income. The exporting company in high tax jurisdiction shows minimal profit. ($20,000). The $180,000 in tax-free income can be deposited in a bank account or other investment instrument according to the wishes of the onshore company.
The merchandise can be sent directly to the exporter's client.