Offshore factoring is the process of purchasing commercial accounts receivable (invoices) from a business at a discount.
Offshore factoring presents an excellent opportunity for internatinal companies to reduce their overall tax burden, but determining an appropriate discount rate that is factually based and economically justified is critical to reducing potential controversy with the IRS.
Significant benefits achieved by this arrangement, include receipt of bulk buying discounts and accumulation in a tax-free area of the net mark-up on resales to the manufacturing units.Additionally, factoring trading debts of a company in a high tax jurisdiction through an offshore company established in a low tax jurisdiction may assist in transferring funds to the low tax jurisdiction.
