Int. trading - tax savings through offshore company?

[Wolf]

This question has got nothing to do with my other thread but it is about my main business importing goods exclusively from the UK. The import process is standard, I am importing in the name of my CC and supply agencies and wholesalers with the product.

But in the future I would like to do it as follows:

My CC pays the offshore company for the goods, the offshore company pays the manufacturer, manufacturer sends to SA as before.

My CC only makes a small profit, the offshore company makes the real profit.

Is this idea possible? Can this offshore company act as some kind of agency so to speak? They aren't the manufacturer but I am paying them in order to supply me the goods from the manufacturer. Can this work?

[BusFact]

I have very little experience in international finance, but see no reason at all why your proposal shouldn't work. It sounds perfectly legitimate and most likely happens all the time.

Your biggest issue is the complication around being involved in or owning the "offshore company". If you are a resident SA citizen, then there will be tax implications. The main one being what happens to the funds you personally receive from the offshore company in the form of dividends, fees or salary. The other would depend on where the offshore company is based and the relevant legislation in the country.

If you can get professional advice around these tax and administrative issues, then the core question about being allowed to be a middleman should be no issue.

[Wolf]

I have permanent residency in SA, however, due to the change of my business and life structure I am planning not to stay in SA for longer than a few months a year, so according to this reference I am not considered being a resident anymore:

In term of this test, such a taxpayer is resident in South Africa if their stay in South Africa exceeds the following:

91 days in aggregate during the year of assessment (tax year), and
915 days in total during the preceding five years of assessment, and
91 days in aggregate in each of the preceding five years.
All three must apply for a taxpayer to be considered resident in South Africa for tax purposes.

Source: http://www.moneywebtax.co.za/moneywe...2303&sn=Detail

I am not going to pay myself a salary and make all payments with an offshore edit card. And in my home country I am simply not telling anyone about my SA business ;-)

So I guess the question is answered, offshore it is.

[Dave A]

Then wouldn't your SA business become classified as a foreign owned business?

[BusFact]

Then wouldn't your SA business become classified as a foreign owned business?

If so, what are the implications of this?

[Wolf]

Then wouldn't your SA business become classified as a foreign owned business?

As BusFact already asked, what are the consequences?

[Dave A]

I was wondering much the same when the question of foreign ownership classification came to mind. I suggest there are at least two possible consequences to investigate if relevant.

I recall there is a withholding tax that is at a higher rate than the normal corporate tax rate for foreign owned companies. I'd check the details unless (as I suspect) the intention is to have next to no profits realised in the local trading entity.

The other possible consequence in this age of preferential procurement is whether there might be a BEE rating effect. This would depend on the nature of your clientèle, I guess.

[Wolf]

Exactly, next to no profits, just enough to cover overheads.

I was researching and I think for me this is the best way to structure my business. Since this CC will make only very little money it will also make no difference whether I am in the country for 3 or 6 months. Perhaps a way to finally make my dreams come true, 6 months Europe, 6 months SA.

[wynn]

LIC Endowment Assurance Plans & Policies.

Was that spam I just saw???

[Dave A]

Now you see it.

Now you don't