Physical Sales and Distribution - Bahamas Business Guide

 

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.

 

 
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