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Suffering from unfavourable tax regimes? Our offshore strategy can help you generate more profits and pay less taxes

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Initially, for tax purposes and to maximise the bandwidth available to you, you can locate the main front-end of your Web site in your home country and locate the transaction end on our Jersey network. You can migrate the entirety of the Web site offshore as and when you feel it is best. Your new offshore company (International Business Company or IBC) does not have to be based in Jersey and can be changed over to any location giving you the flexibility to locate your business inside or outside the EU’s reach. If you feel that you want to make your IBC VAT compliant, you can locate it in the Isle of Man or Jersey and register for VAT with the authorities.

Your IBC will simply then serve as unique extension of your business responsible for all your Internet legal and technical requirements.

Dynasoft Ltd will be your local liaison and consultant for all aspects of your Internet strategy and presence.

Included below is a comparison chart that should help you assess the viability of our proposal vs. ‘leaving things as they are’. It is a cost-matrix and time-series graph showing the costs associated with hosting the site on and offshore, and finally the gross profit over a year that you can expect to obtain with your new presence compared to using one of your local ISP’s. The assumptions made are:

  • The business that has been chosen here is a software company selling its products online with 10 employees;
  • This analysis is for years 2, 3, and 4 after the first year so as to avoid including set-up costs in the analysis;
  • All costs are assumed to stay the same over the three years, although this can be changed without affecting the validity of the analysis;
  • Suggested hard drive space used is 250MB and monthly bandwidth allowed 10GB;
  • All costs that are not associated with your Internet presence (labour, company running costs,...) stay the same whatever your chosen option;
  • For the sake of clarity, these costs do not change over the three year period shown;
  • This analysis is done using the offshore hosting options as discussed in Options and similar options that offers the same features but with a typical onshore provider;
  • The local ISP data is taken from the second main Internet provider in Spain, Ono, SA, and off-the-shelf products;
  • The offshore costs on the other hand are derived from our current hosting service charges and typical estimates for the costs of the IBC.

Cost-Benefit Analysis

1. Variables

Variables

Values

Information

s = online sales only

-

examples

x = average cost of one labour unit

€30,000

say, 10 units are used

y = average cost of one running cost item

€10,000

say, there exist 4 items

h = total yearly hosting charge

see below

-

w = transactional charge

0.015

actual charge

d = credit card bank charges

0.03

estimate

i =  IBC yearly fees

€900

estimate

v = VAT

0.16

example

a = various estimated admin. and consultancy costs related to the IBC

€700

estimate

t = tax on profits

onshore:0.3
offshore: 0.02

example

z = after tax profit

 

 

2. Estimated Yearly Profit

A. Onshore:
The total yearly hosting charge, ‘h’ = yearly standard hosting charge for 250MB web space + ShopFactory Professional by Software, Web design and shopping trolley software (RRP: €480) + domain name administration (typically, €135 from Retevisión)  = €4,590 + €480 + €135 = €5,205

The yearly profit can then be estimated using the following equation:

z = ((1-(v+d))s - (10x + 4y + h ))(1-t), where the variables are given in the table above.

Profit Year 2:
If s = €500,000, then z = €41,856
Profit Year 3:
If s = €700,000, then z = €155,256
Profit Year 4:
If s = €900,000, then z = €268,656

B. Offshore:
The total yearly hosting charge ‘h’ = MyShop247 Shop option with 250 products and 5 modules + 250MB web space surcharge = €13,000.

The yearly profit can then be estimated using the following equation:

z = ((1-(w+d))s - (10x + 4y + h + i + a))(1-t), where the variables are given in the table above.

Profit Year 2:
If s = €500,000, then z = €117,992
Profit Year 3:
If s = €700,000, then z = €304,192
Profit Year 4:
If s = €900,000, then z = €490,392

3. Comparison Graph over Time

Como pagar menos impuestos How can I pay fewer taxes

This simple,  yet effective method, demonstrates how profits quickly rise after an initial period and should make the savings fairly substantial. Profits using our offshore options should be systematically higher than any onshore alternative.

 

 

 

 

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