YOUR OFFSHORE E-COMMERCE TRADING OPERATION.

THE COMPONENT PARTS.

No-one likes to pay tax and the overall burden of tax in the world's larger business jurisdictions is heavy not just in itself, but also imposes substantial and worsening administrative burdens and hassles on a business.

Prior to the Internet there was little that most types of business could do to escape tax and red tape, although individual owners might be able to go 'offshore' with the proceeds of their work andincreasingly did so as tax levels rose. Individual tax levels have fallen back to some extent in some countries, but the taxman has become more efficient and the classical equation of working onshore and enjoying offshore becomes ever harder to sustain.

The Internet has totally changed the equation and this site attempts to explain why and how almost all businesses can substantially reduce their tax bills and preserve wealth by taking advantage of offshore e-commerce. This section in particular offers practical help in choosing a jurisdiction and in setting up an offshore e-commerce operation.

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INTRODUCTION.

An offshore e-commerce or e-business application can only succeed if it operates in an effective and well-organised environment. This section analyses the key elements of offshore infrastructure, both IT and otherwise, giving practical information on the services that are needed and advice on how to choose providers.

While some types of support have to be provided locally, there is often a choice as to whether a particular aspect of support is sourced in the chosen offshore jurisdiction, or whether it is provided from a more sophisticated onshore environment.

Some characteristics are shared by all offshore e-commerce operations, but others are specific to a particular application we have therefore examined some specific aspects of various locations to provide basic guidelines.

In considering software or systems tools, it is important to be aware of the need to integrate new e-commerce operations with existing systems. Current software development is normally based on open standards, especially where the Internet is concerned. So-called 'legacy' systems, which are proprietary more often than not, can be incorporated into e-commerce systems, but it is an issue to be addressed when planning new software acquisition. If you are honest with yourself you may conclude it is time to replace the old proprietary system altogether, because this would obviously be the ideal time to do it.

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CUSTOMER/PARTNER COMMUNICATION AND MANAGEMENT SYSTEMS.

Offshore e-commerce and e-business inevitably imply transactions with other parties, whether these be customers, clients, partners, suppliers, employees or prospects. There is nothing about an offshore location as such which makes for differences in the array of systems and software tools needed to communicate with them, other than the fact that an offshore operation is obviously in a different place; but if the functions involved in communicating are going to be performed offshore, then questions of capacity, security, maintenance and management arise.
The systems elements needed may include:

- Customisable front-end 'offer' pages
- On-line catalogues
- Sales process components including shopping basket, order form, registration form, - - - - - - - multi-currency converter, tax calculator
- 'Exchange' or 'auction' management software
- Links to remote payment processing facilities
- Communication with a customer or contact database
- Reporting of customer behaviour
- Links to accounting and credit management systems

In most jurisdictions offshore e-commerce is not yet established on a substantial scale, and it will not be possible to source such system components locally. In some of the leading jurisdictions there are firms, or combinations of firms, offering off-the-shelf turnkey solutions for some of the more basic commercial activities, but these are likely to be re-branded solutions bought in from major systems suppliers.

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LOCATION.

This is not the place to determine how to choose an offshore Jurisdiction, individual circumstances vary so widely that we really need to look at your requirements on an individual basis, especially when you consider the potential disaster if a structure is set up and you then find you cannot obtain one of the vital components that you need. However, it is possible to indicate some of the issues that need to be considered at an early stage when you are assembling the basic business plan because we can always fine-tune it later.

Although we have access to various people, lawyers and accountants, in all major jurisdictions who are able to offer advice on establishing companies, opening bank accounts etc many complex legal and tax factors impinge on the choice of jurisdiction for an e-commerce operation, in some cases local advice in any particular jurisdiction is likely to be less than objective so this is where we can help you make an impartial assessment of suitability.

Sometimes when we set up a complex structure it is necessary to use internationally-competent professionals to make certain initial choices; later it would usually be OK to use cheaper local professionals to make the more routine arrangements and to maintain them. Please be assured that your point of contact would always be ourselves, this is advantageous for several reasons, firstly we can ensure you privacy, secondly you can bounce ideas off of us to ensure everything runs smoothly, thirdly and perhaps the most important we can keep the system simple and help you avoid unnecessary costs and facilities. Tax is an obvious concern, both in terms of the relationship of a jurisdiction to the home country of a given operation, or to the domiciles of its shareholders if they are spread around, and in terms of VAT or sales taxes. Legality in general is another concern, although it is often the case that if a service or product is illegal in one place there will be plenty of locations where it is seen as totally acceptable. Financial services and the marketing of them is a highly regulated area - an e-tailer of funds, for instance, would have to consider the status of a given jurisdiction in relation to each national market from which clients might emerge. Selling car parts or motorcycle helmets is obviously less sensitive, but there is still product liability, distance selling, data protection and so on.

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TECHNICAL CONSIDERATIONS.

E-commerce operations have certain needs that traditional enterprises do not; thus there is a certain level of technical and infrastructure development that an offshore jurisdiction as a country must attain before it can qualify as a suitable location for an e-business. This can be summarised as follows: Modern and reliable telecommunications facilities. It goes without saying that any site will have to be accessible 99.9% of the time. The volume of Internet traffic that a telephone company infrastructure would be able to handle is also vital.

Depending on the type of business being conducted from the site, the amount of bandwidth or network capacity is also of importance and cannot be taken for granted, even in the EU problems arise, ask anyone you know who lives in Spain how frequently fun and games occurs with the internet due to Telefonica who is the local Telco. It is very important for example that if the site was a source for downloading music, the bandwidth required to provide multiple access to download the product would be in terms of Mbps, equivalent to multiple ISDN lines. This is outside the capabilities of a smaller or less well developed jurisdiction. A source of technical expertise for initial establishment of a site, involving installation of hardware and software (often rather complex for a substantial e-commerce application) could conceivably be supervised from anywhere, but ideally a local IT company should be available if needed, even if they only needed to do a small part of the job and act as a sub-contractor. Clearly, there will be ongoing maintenance needs which absolutely have to be satisfied locally; down-time is a no-no for an e-commerce operation, after all a site going down equates to a shop being closed, when the local competition is open in other words, anyone surfing the web will simply click on the next site and go somewhere else. Even worse is when a site is down for a few days and no one moves quickly to do anything about it, we generally avoid this by regularly checking clients sites and choosing reliable ISPs, but these are all vital considerations and raises the question, does the jurisdiction have the pool of people to be able to satisfy these needs? Again, for many smaller offshore jurisdictions the pool will be limited and skill levels may not be that high. From a technical perspective things are moving very fast but we feel the list below comprises all the major players. If you know of any good facilities in other jurisdictions please let us know as they may be useful to our clients email to info@alloffshoreneeds.com

Specific information is available on the following, Isle of Man ~ Anguilla Jersey ~ Gibraltar ~ Bahamas ~ Liechtenstein ~ Hong Kong ~ Barbados ~ Luxembourg ~ Bermuda ~ Cayman Islands ~ Malta ~ Costa Rica ~ Monaco ~ Cyprus ~ Panama ~ Guernsey Switzerland ~ Ireland. Details available from info@alloffshoreneeds.com

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ISP & HOSTING SERVICES.

If your company is thinking of offshore e-commerce then it is highly likely that your internet site and/or payment processing will be hosted in an IOFC (International Offshore Financial Centre). By and large, the most developed hosting facilities in offshore jurisdictions are offered by the incumbent telecommunications supplier(s). Often this is still a monopoly (Cable and Wireless in many Caribbean jurisdictions), although there are competing suppliers in some cases. With competition absent or limited, telecom costs can be high.

Internet service provision is not usually subject to monopoly restrictions, and in many jurisdictions a number of small, local ISPs have sprung up. They can provide usually only limited (or expensive) international connectivity, because they are dependent on the local telecom's operator for long-distance connections. Choice of ISP or host is evidently a vitally important part of setting up offshore, since the ISP will be the sole link between your company and your clients. A number of important points need to be checked:

Good connectivity -- this means that the ISP or host should have stable connections with a telecom's provider, using high quality equipment with spare bandwidth available. Ideally, back-up connections via a secondary telecom provider offer the best guarantee of 100% availability for your site. As noted above, this will be unachievable where there is a monopoly telecommunications provider.

Secure facilities -- your business data will be stored at some stage on equipment at an ISP's facilities; if you are using co-location with a hosting service your own equipment, whether real or virtual, will be vulnerable along with the data itself. The host or ISP's premises, equipment and systems must therefore be secure.

Qualified personnel -- the equipment and systems needed to provide ISP and hosting services are complex and require maintenance, not to mention ongoing development to stay abreast of Internet techniques; the ISP's staff must have the necessary skills, which may be in short supply in an IOFC.

Scalability -- the expanding nature of e-commerce means that your site will probably grow; at least, you hope so. Your ISP or hosting partner should have room for growth in terms of physical space, equipment capacity and funding.

Jurisdictions vary in their suitability as locations for e-commerce operations, our country profiles will often assist you and an example is below. Please keep in mind that the profile consists of advice as to how to set up an operation doing it exactly by the book you can usually bend a few rules no one is really going to worry about and slice 50% off the cost.

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