The Swedish Agency Structure
One of the developments which have been triggered by Globalization is the significant increase of companies, involved in international trading activities.
In the recent past, it was common to use an offshore company, to arrange the invoicing and lower the tax burden on the profits.
However, the problem when using offshore companies in international trading activities is that offshore companies, although good to lower cost and ease payment & logistical issues, could trigger commercial and fiscal issues.
On the fiscal side offshore companies could create certain negative consequences such as difficulties with VAT receipts, payments and registration, furthermore, under certain circumstances a higher withholding taxation could be applicable! On the commercial side, occasionally the use of offshore companies leads to a higher scrutiny and reluctance, by commercial partners.
Traditionally a United Kingdom (UK) company is used to address the Fiscal and Commercial issues described above. Conceptually, a U.K. company enters into an agreement with the offshore company, in which the U.K Company agrees that it will trade on behalf of the offshore company as its agent.
However, lastly this UK solution is being hampered by significant administrative delays, to address issues such as VAT registration.
Luckily a new viable alternative is now available in Sweden. Sweden , officially the Kingdom of Sweden is a Nordic country on the Scandinavian Peninsula in Northern Europe . Sweden borders with Norway and Finland , and is connected to Denmark by a bridge-tunnel across the Öresund.
At 450,295 square kilometers (173,860 sq mi), Sweden is the third largest country in the European Union by area, with a total population of about 9.4 million.
Today, Sweden is a constitutional monarchy with a parliamentary democracy of government and a highly developed economy. In 2010, the World Economic Forum ranked Sweden as the second most competitive country in the world, after Switzerland.
All contracts of purchase and sale, all the invoicing and all the general correspondence will be made in the name of the Swedish Company.
The Swedish Company will receive all the revenues from such business as nominee or trustee. Based on the contractual arrangements, the Swedish Company will keep part of the revenues to cover for expenses (usually 10%) and transfer the balance to Exporters Company.
From a Swedish point of view, the fiscal authorities would accept, subject to certain conditions that 90% of all monies are passed over to the exporters company, provided that they are not the profits generated with trading activities conducted in Sweden.
In order to protect the trading profits from Swedish taxation it is essential that no trading activities are conducted within the Sweden.
The direct advantages of this solution are that it avoids extra scrutiny and reluctance by international trading partners.
Additionally, on the fiscal side it will reduce cost, because the Swedish company is in a position to register for VAT, so that when selling goods to customers located in any E.U. country, it need merely quote its VAT number and need not actually charge the VAT.
Lastly it reduces the withholding taxation which could be applicable under certain circumstances and the effective rate of taxation on the gross receipts of the Swedish company as an agent (ie: the total trade invoiced through Sweden) will be only 3%.