Offshore for Exporters
Using an offshore company for export operations can effectively optimise your costs. The offshore company takes part in the export structure as an intermediary that sets the export price of the goods and serves as the place where profit is accumulated. As the owner of this offshore company, you do not need to own a Ukrainian company. The offshore company buys goods or services directly from the Ukrainian exporter.
Every year, the tax authorities of various countries impose increasingly strict restrictions on dealings with offshore companies.
When using an offshore company for exports from Ukraine, you need to pay attention to the following restrictions imposed by the transfer pricing provisions of the tax code, known as controlled transactions:
- Transactions with "related parties"
- Transactions through commission agents – non-residents.
- Transactions with non-residents from countries where taxation is 5% or more lower than in Ukraine.
- Transactions with non-residents that do not pay corporate income tax.
A company resident in Ukraine must file an annual report on controlled transactions with the tax authorities, which have the right to review transaction prices if they differ from market prices.
Transactions are deemed controlled if two conditions are met at the same time:
- The total annual income of the Ukrainian exporting company exceeds UAH 150 million for the reporting year.
- The volume of the Ukrainian exporter's transactions with each counterparty exceeds UAH 10 million for the reporting year.
Thus, even offshore companies can be used to implement an export structure.