Low business tax – Case Studies
The following fictional case studies show the diversity of ways in which we may be able to help you achieve a low business tax level. It is important that you establish independent legal and tax planning advice on all aspects of a proposed business before proceeding. These examples are given in good faith and on the understanding that interpretation may change.
AviacoNews searches the world?s online press information for data about the aviation industry. Hundreds of clients world-wide depend on their services for up to the minute information. Payment is by yearly subscription. AviacoNews forms a Jersey based IBC and sets up a server through us. It then informs their several third party information suppliers based in London, New York and Tokyo to transmit the information to their Web site. Services that are not based in the EU and information may be purchased by EU end-users without attracting VAT.
The Gift Tree sell small gifts mostly to the European market. They have a warehouse in Guernsey. By keeping the retail price below £18 ((approx. 21 Euros) there is no VAT or Import Duty into European Union countries. Customers select the product they want from the web site and pay by credit card in Euros. They have no retail outlets so their staffing and building costs are kept to a minimum. Because they are building a database of names, addresses and anniversary dates they are able to build annual repeat business. One real-life example similar to this one is a company operating from Jersey, Play, that serves the whole of the European Union. They only sell DVD?s and post free anywhere in the E.U. Check out their Web site at www.play.com. Another popular DVD site, also operating from Jersey is Jersey Tesco.
NetFX is an anti virus sold exclusively on a Web site. NetFX can be downloaded over the Internet. After forming an IBC a hardened NT Server is set up with details of the product. It is then distributed world-wide to users. All a customer needs to do is enter their credit card details. NetFX is not sold to end users but licensed. EU customers do not need to be charged VAT as a licence is treated as a service. Services performed outside of the EU do not attract VAT. If customers require that manuals and CD ROMs be sent, these physical items can be sent to them with a nominal value of less than the £18. They then pay and download a key from the Web site to unlock their software . Typically, they would for the actual full price of the software online.
GetItOnTheWeb is an expert agency that matches queries from clients with any certified professionals world -wide. They form a Jersey based IBC and develop a web site where clients can upload any queries they have on specific subjects. They then pay a fee based on the number of queries sent. The queries are then offered to registered, certified and authenticated professionals. Clients pay by credit card and the professionals are paid on a monthly basis. This could apply to companies wanting to sell specialised data (legal, engineering,…) on the Internet to a portfolio of clients who register and pay online.
GetAway is a web service that provides a travel agency with details of holidays world-wide. It contains a database of 400 tour operators and is updated daily with the details of the latest packages and bargains. It thus provides the consumer with a single point to find just about every holiday deal available. Because of the volume of sales GetAway is also able to offer reductions in price. Tour operators based in the EU have to pay VAT on the mark-up they charge the holiday maker. GetAway avoids this charge and thus has a competitive edge.
BioEng is a pharmaceutical company doing biochemical research. They set up a research and development company in Singapore and an IBC in Jersey to represent the lab?s commercial interests to the wider world. Any intellectual property won?t belong to the Singapore entity but to the Jersey IBC. Once the research is successful BioEng is able to sell it world-wide via their web site in Jersey.
WarrantyYouWant is a company that provides white good manufacturers with warranty and insurance work. WarrantyYouWant is a Jersey based IBC which has entered into contracts with all the major white good manufacturers. It out sources this work to local contractors. A white good manufacturer can include a section on their web site that enables a customer to take out extended warranty insurance. This section is a link through to WarrantyYouWant which captures all the client details, including payments. In the event of a failure the client goes to the WarrantyYouWant web site and completes a form which describes the nature of the problem and their current address. WarrantyYouWant then dispatches a locally based contractor to fulfil the work. By not offering a telephone service but using a web based business model WarrantyYouWant is able to substantially reduce the cost of the warranty and still make the same level of profit which is now taxed at 2%. Because the cost is so dramatically reduced WarrantyYouWant finds a much greater take up on its service.
In all examples the company pays no more than a low business tax level of 2% on its profits to the States of Jersey, if you decide to base your IBC in Jersey.