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bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4332
Experience:  FCCA FCMA CGMA ACIS
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Hi...I have a question in Terms of average gross margins: lets

Customer Question

Hi...I have a question in Terms of average gross margins: let's say I have an online shop - and the people order a cushion (will be produced in India) - Price in India is 10 EUR + Shipping 1 EUR + Import Duty 3 EUR = 15 EU.. the item will be sold here in Germany for 30 EUR... The average gross margin is over 100% and i thought, if possible, it might be good to take some of the margin in another tax jurisdiction (such as switz, lux, malta or similar) to make more tax efficient in germany.
Basically is there a way to have a third party (company) sitting between the buy and sell stages??
Submitted: 3 years ago.
Category: Tax
Expert:  bigduckontax replied 3 years ago.

Hello, I'm Keith and happy to help you with your question.

Well you can. For example that is how Amazon, Vodafone and Starbucks operate in the UK, invoicing from a tax haven to reduce their profits to a minimum level for UK Corporation Tax purposes. They use tax havens like Jersey, Gibraltar and the Turks and Caicos Islands. However operating in such havens doesn't come cheap, it is big business there. There may well be local directors mandatory, accountants, registered offices and legal charges to meet. For the big multi-nationals these are peanuts, but for smaller enterprises, the reverse is the case and profits quickly eaten up. There is also increasing pressure for such antics to be blocked in their original countries of operation and legislation may be planned to effect this.

Unless your business is really large you may find the costs of operating in tax havens outweigh any additional profits made by the tax avoided.

I feel an evening with a wet towel round your head and the backs of lots of envelopes are called for to work out whether the costs of such tax avoidance are worth the candle for your enterprise.

There you are, a general canter through the methods often used. I do hope I have shown you how tax is currently legally avoided through the use of tax havens and shed some light on your problem.