This is a method of moving profits from a high tax jurisdiction to a low tax jurisdiction. Transfer pricing is not illegal if correctly structured and implemented. All that is required to achieve substantial tax savings is to interpose a non connected company administered from Morocco in between a transaction that would otherwise take place directly between two high tax jurisdictions.
A UK company purchases clothing from various overseas companies. The Moroccan administered company takes over this task by arranging the purchases and then resells same to the UK company at a higher price. An exporting UK company can obtain a similar advantage in reverse.
A UK company organises the export of French and Italian motor vehicles to the Far East and Australia. This type of trade could be conducted entirely through a company administered from Morocco.
The offshore company acquires the property and when sold the property still remains under the same ownership, as it is the beneficial ownership of the company that is actually transferred, the property remaining in the name of the company, thus avoiding taxes on the property transfer.
The offshore company lodges a deposit with its bank which in turn guarantees bank lending to a UK company. The borrowing company in the UK obtains tax relief on the interest it pays.
A properly structured offshore company acquires the rights and enters into agreements with licensees wishing to utilise the patents, technical know-how, licences, franchises or copyrights around the world, thus mitigating taxes.
High earners in marketing and other areas enter into individual employment contracts with an offshore company which then sells their services outside their normal country of residence.
Most Revenue Authorities have in place anti-avoidance legislation designed to prevent offshore companies from taking these advantages. It is vital that through commercial documentation and behaviour it can be proved that the structure operates autonomously and not at the direction of either seller or buyer.
We have highlighted herein a number of specific fields of tax avoidance. However, there are many other uses which can be discussed on an individual basis.