This section of the Bahamas Business Guide deals with sales and
distribution from an offshore web-site, when the products and services
concerned need to be delivered in a physical form or, in the case of
services, using physical agents (usually people!). The distinction
between such products and services and those that can be downloaded by
computer (see Digital Sales and Distribution) is that a taxable event
occurs that may attract import duty, VAT or sales taxes. See our Tax
Law section for an explanation of the impact of tax on offshore
e-commerce.
Currently the Internet is experiencing huge growth of both retail
and business purchasing, and most of this is taking place from
web-sites (servers) in high-tax jurisdictions. However, there is no
technical reason why an e-shop should be confined to an onshore
jurisdiction, indeed an offshore location offers many possible benefits
to a company that either has or expects to have a significant volume of
electronic turnover.
Obviously the central benefit to be gained from an offshore
location is to do with tax. Providing the corporate structure is
correct (see Tax Law ), an offshore company will pay little or no tax.
If its owners (shareholders) are themselves offshore, then that will be
that. But even if the offshore company is controlled from a high-tax
jurisdiction then there may be considerable flexibility in the timing
and amounts of tax needing to be paid. For a company that is able to
move the bulk of its supply-chain offshore, it is often possible to
avoid a permanent (thus taxable) presence in the original high-tax
country: simple warehousing and delivery functions are not enough in
many countries to create a taxable presence, and anyway they can be
outsourced.
Additional benefits may include lower labour and overhead costs:
e-commerce sales and distribution is always likely to reduce such
costs, but the savings may be much easier to realise if the web-site is
located far away from existing operations. However it is not always
true that offshore jurisdictions are cheaper or more flexible than
high-tax jurisdictions. See the Lowtax.net Jurisdictions section for
information about individual jurisdictions.
One sure benefit of e-commerce is ‘internationalisation’, and it
may well be that an offshore vendor is in a more favourable situation
to service multiple and diverse countries than one in a high-tax area.
If a company’s procurement is global in scope (or could be) then an
offshore jurisdiction will almost certainly offer interesting
commercial and fiscal opportunities; some offshore jurisdictions have
tax-free zones, or are themselves completely tax- and duty-free,
allowing warehousing, processing and marketing of products for onward
shipping that will in this way avoid any entanglement with the tax and
duty net until the very last moment.