What is re-invoicing?

Reinvoicing is the use of a tax haven 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. It should be noticed that a similar structure can be utilized by an importer.

What would be an example of re-invoicing?
An onshore corporation sells $1,000,000 of goods or services to France normally every year. Assuming cost of goods and services sold and operating expenses are $600,000. the onshore corporation earns $400,000 on its sales before taxes. Taxes will average say $160,000 thus reducing net profits to $240,000.

The onshore corporation establishes a tax haven corporation to act as intermediary managed by a Stoughton correspondant company. The onshore corporation sell its goods and services to the tax haven corporation on paper for say $600,000. The tax haven corporation in turn sells the goods and services to the French client for $1,000.000. The tax haven corporation, thus earns $400,000. Since there are no taxes, $400,000 is the net income after taxes. The exporting corporation shows no profit. ($600,000 gross sales less $600,000 cost of goods sold).

The $400,000 in taxfree income is then deposited in a bank account or other investment instrument in London, New York, Miami, Nassau, or Panama according to the wishes of the onshore corporation. The account is under the control of the onshore corporation.

The basic process of reinvoicing saved the onshore corporation $160,000 in taxes less a small reinvoicing charge.

Why are the tax haven corporation's profits free of taxes?
The intermediary corporation is formed in a country that has no taxes on import-export transaction. For example, the British Virgin Islands, Samoa, Cayman Islands, and Panama have no income taxes on reinvoicing transactions.

How Is the offshore company structured?
To provide anonymity, the nominee officers and directors are provided by a Stoughton correspondant who manage the company. Bearer shares are issued and delivered to the owner as proof of ownership.

Will the offshore company's bank account have to be located offshore?
No, the management company can establish the account with any financial institution in any major financial center in the world. For example, many reinvoicing clients have established bank accounts in New York, Miami, Channel Islands, Bahamas, Cayman Islands, etc.

How does the staff of Stoughton know what to re-invoice?
The beneficial owner of the intermediary company provides instructions on a regular basis by facsimile, e-mail, courier, or airmail.

What About confidentiality?
It is the policy of Stoughton, Ltd. as well as the laws of all the tax haven nations concerned that information is not released without consent. To do otherwise violates secrecy laws.

What Happens To the Offshore Tax Free Profits that Are Earned?
They can be immediately released as instructed by the owner or alternatively they can be accumulated offshore say with a major international bank where interest on deposit accounts is not subject to tax.

If the offshore company is managed from xxx, does it follow that the merchandise has to be sent there or the services performed there?
No. The merchandise can be sent directly to the exporter's client. Services can be performed in any offshore location - a common enough process in the new economy. The only functions performed, in xxx, are the preparation and dispatch of the new invoice and the management of the banking operations.

What happens if the owner should become incapacitated and the offshore company at that time has in its name substantial assets such as cash?
Assuming you ensure that your beneficiaries have access to the bearer shares, then if such a case should occur, they would simply produce the shares to the management company together with some sort of evidence of your incapacitation and all control of the assets will be transferred to them. There would be no transfer taxes, estate duties, or other forms of taxation levied on the assets.

What other Functions will Stoughton, Ltd. provide?
Once the offshore company has been established, Stoughton, Ltd. will arrange for a post office box, telex, telephone, and facsimile service available for use by the offshore company. The management company will then begin reinvoicing.

What are the fees for re-invoicing? How do I determine whether such an operation is to my financial advantage?
The set up costs are generally less than one would think which includes letterhead, telephone, telex, facsimile, mail service, as well as a Samoan, Panamanian or British Virgin Islands tax haven corporation. There will be a 2% charge on all re-invoicing operations. Reasonable out of pocket expenses are additional. Annual renewal fees are minimal.