British Virgin Islands: The Seven Steps To Offshore E-Commerce

Last Updated: 2 May 2001
Article by Andrew Flowers
  1. Find An Offshore E-Commerce Consultant With The Experience And Contacts To Provide The Complete (Multi-Jurisdictional) Offshore E-Commerce Solution.
  2. Set Up Tax And Regulatory Efficient Offshore Corporate Structure.
  3. Ensure Company Is Seen To Be Managed And Controlled From Offshore.
  4. Host Web-Site Offshore.
  5. Use Offshore Payment Solution.
  6. Open Offshore E-Merchant Bank Account.
  7. Enjoy The Benefits And Advantages Associated With Operating E-Commerce Offshore

Increasingly entrepreneurs and companies engaging in e-commerce are looking to established, well-regulated offshore jurisdictions for complete e-commerce solutions. By establishing in and conducting e-commerce from carefully selected, lightly regulated, low direct tax offshore jurisdictions, e-commerce companies are able to gain an enormous advantage over their onshore-based competitors. This advantage extends further than just significant tax savings for the company. A number of offshore jurisdictions, recognising that e-commerce is still very much a fledgling industry have adopted very favourable regulatory frameworks, designed to allow e-commerce to develop at its own pace, driven and shaped by the needs and demands of the industry and market itself. In addition tax and regulatory compliance costs are substantially reduced freeing up valuable (and often limited) resources and personnel to focus on developing the company's products and services.

Corporate Structuring

Of course, offshore e-commerce is about more than just purchasing an international business company in a distant island. For the most part, e-commerce is not about one off transactions through an offshore company, but rather it envisages very real companies engaging in international trade and commerce on a daily basis. These businesses need more than just an off-the-shelf company that pays its annual government licence and registered agent's fees. They require a very carefully planned and structured (often multi jurisdictional) corporate vehicle(s) which takes into account not just the needs of directors, shareholders and investors, but that is designed to accommodate every facet of the business, from marketing to the hosting of the web-site, from payment solutions to banking, from fulfillment to customer care, and ultimately the distribution and repatriation of profits in the most tax efficient manner.

Offshore Management And Control

Critical to any tax and regulatory effective offshore structure is the question of management and control of the company. The e-commerce company with the costliest, most sophisticated corporate structure will very likely expose itself to corporate and income taxes, in certain high tax onshore jurisdictions, unless the company is seen not just to be incorporated offshore but also, to a substantial degree, managed and controlled from the desired offshore jurisdiction. This means more that just offshore "nominee directors". It envisages people with the requisite skills and knowledge making very real commercial decisions, on behalf of the company, from offshore. Fortunately, the premier offshore jurisdictions have a wealth of professionals who are able to do just this. With the correct offshore partners, e-commerce companies can be effectively managed and controlled from offshore.

Offshore Hosting

There is currently tremendous uncertainty surrounding the tax and regulatory treatment of e-commerce. One of the most contentious areas is that of web-site hosting. Much has been debated and written about whether a server or a web-site constitutes a permanent establishment. If and when national and international revenue authorities reach consensus on this is impossible to say. Whatever the outcome, hosting offshore has significant advantages. Possibly the biggest advantage is that it adds weight to the identity and credibility of the company as a legitimate offshore e-commerce business. Moreover, a number of offshore jurisdictions now offer web-site hosting on a technical parity to that available onshore, and at surprisingly competitive rates.

Offshore Payment Processing And Banking Solutions

For any e-company to be regarded as truly offshore, it is necessary for the payment processing and banking solution to take place offshore. This further strengthens the identity of the business offshore and has the added benefits, in many cases, of avoiding compliance with cumbersome onshore exchange controls and other fiscal and revenue regulations. As with offshore hosting, there are now many reputable payment processors and banks offering extremely competitive offshore solutions, with cutting edge features such as multi-currency pricing and same day settlement, reliable online banking and security features such as 1024 bit encryption.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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