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Case Study 9: Offshore Online Sales of Consumer Products

Let’s take the example of a newly created company- Toy Co Ltd. Company specializing in retail sales of toys on the Internet. Founded by two Canadian businessmen specialized in e-commerce and retail sale of toys, it operates from its headquarters located in an offshore jurisdiction.

Starting online sales of consumer products

Both founders wish to effectively combine business and family life. In fact, they expect to benefit from all the tax advantages of an offshore website, while enjoying a better quality of family life.

The offshore company and the merchant website will be established in the British Virgin Islands (BVI). To specify, the founders have links in this English-speaking country. The founders are planning to create and run their company directly from the British Virgin Islands; therefore, a work permit is required for them. The work permit will be issued after the recruitment of a local administrative staff.

As there is a lack of qualified workforce, there will be a recruitment needed of one or two expatriate computer technicians. Of course, a work permit will also be required for them. Toy Co Ltd. wants to sell its goods worldwide. All orders will be carried out by the BVI company. These goods are then delivered in bulk in warehouses in Europe and the USA.

The warehousing of goods and shipping to the costumers will be arranged by an outsourcing company – Interhouse Ltd. Established 40 years ago, this company specializes in the storage and the delivery of consumer goods worldwide.

Development plan of Toy Co Ltd:

For his project, Toy Co Ltd seeks the services of a law firm in the BVI (BVLAW), an Internet service provider in the BVI (BVISP) and Toronto designer platform for e-commerce (NCPEC). For international logistics, it will contact Interhouse Ltd.

Here are some glimpses of the tasks assigned to each of its suppliers:

  • BVLAW is responsible for the creation of Toy Co BVI Ltd and the opening of offshore bank accounts
  • NCPEC is responsible for the constitution and the merchant website design with its interactive catalog, ordering facilities, shopping cart, tax calculation, etc.
  • BVISP will focus on the co-location of the merchant website on the server of the offshore service provider

Moreover, once incorporated, Toy Co Ltd. will be involved in the project and will work closely with these professionals:

  • The negotiation of bank cards and credit cards, the merchant ID and clearance procedures: Toy Co Ltd.
  • The multi-currency payment and customer account management package integrated into the merchant site: Toy Co Ltd and NCPEC
  • The development of a customized inventory control: Toy Co, Interhouse and NCPEC

Customer payments shall be processed in the British Virgin Islands. The import formalities and the payment of import duties and taxes within the E.U. and the United States remain the responsibility of Interhouse Ltd.

As to the corporate structure, Toy Co (BVI) Ltd will be created as an International Business Company (IBC), and will be exempt from all corporate taxes. Regarding the future development, the British Virgin Islands offer Toy Co (BVI) Ltd good development prospects, thanks to excellent financial infrastructure.

Few tips:

Besides the system of online bank accounts, a payment by Paypal is also an effective and reliable means of payment. The company may also be established in other offshore jurisdictions.

Finally, it is possible to generate large revenues related inserting advertising on the website of an offshore company. For this, the ideal solution is to work with advertising agencies online.

See also:

Virtual office services

Online sales of electronic goods

Online sales of consumer products

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