Let us assume that the net cost of a particular toy from China is $10 and the business manages to sell it in UK for $70. This generates a profit of $60. The company will then pay tax on this profit at the applicable rate of tax in South Africa, which is 28%. The company will pay $16.80 in tax and be left with a net profit of $ 43.20

 

We register a company in an offshore jurisdiction, as this can result in substantial tax savings. 

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Let us compare the example above with an alternative scenario, in which the business owner chooses to register a company offshore instead of using a local company.

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The offshore company will again buy the toy for $10 and sell it for $70, generating the same profit of $60. However, as the offshore company will be registered in a jurisdiction where no income tax is payable, the offshore company will retain the full $60 of profit.

 

The $16.80 of tax is completely avoided. In this example, the increase in net profit from $43.20 to $60 represents an increase in the overall profitability of the business of 39%!

 

There is no need for the physical shipment of the goods to pass through the country in which the offshore company is based. Instead, the toys will be shipped directly from China to the UK, in the same way as when a local company was used.

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The Isle of Man, Nevis, Belize, and BVI are a few that would be appropriate for this purpose. It really depends on your turnover to fit into the budget to where it makes business sense to set it up.