Example Of Re-Invoicing

Re-invoicing is typically the use of a tax haven corporation to act as an intermediary between two companies as a more lucrative placement of profits. Typically in 0-5% tax jurisdictions.

What would be an example of re-invoicing?

“Company A” is buying goods from “Company B” for the price of 400.000 EUR. They expect to sell the goods for 1.000.000 EUR, which is a profit of 600.000 EUR. In Company A’s country, the company tax pressure is 30%, which means they have to pay 180.000 EUR on their profits.

Let’s say “Company A” used our re-invoicing service. Our offshore entity “Company X” would then buy the 400.000 EUR goods from “Company B” and then sell it to “Company A” for example 900.000 EUR. The profit is now only 100.000 EUR in “Company A’s” country, leaving a more digestible tax bill of 30.000 EUR. This could also be brought to zero but is often not a very longterm solution towards the local authorities.

In this case “Company A” saved 150.000 EUR in towards a small re-invoicing fee.

The profits of 500.000 EUR are now allocated in the offshore entity “Company X” and can from there be accessible from online banking under an unregistered sub-account of the entity, to which you will have complete control and access.

Why are the tax haven corporation’s profits free of taxes?
The intermediary corporation is formed in a country that has no taxes on the import-export transaction.

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