In practice, a non-resident company is an indispensable vehicle for an entrepreneur who is engaged in cross-border commercial operations.

Let us take a standard case and suppose that you are an entrepreneur delivering goods (for example, food, household appliances or some other equipment, oil, power etc.) from one country to another, for example:

Germany		Russia
China		Poland
Czech Republic		Baltic States etc.

Let us further suppose that you are carrying out these transactions on behalf of your local (for this purpose, let us use the term 'resident'), i.e. Polish, Czech etc. company. Accordingly, under the legislation in force, you will pay profits tax on all your profits (including those derived abroad).

Acting in the same way, but carrying out the abovementioned transactions on behalf of your non-resident (for example, American) company, you will facilitate the operation, raise your prestige in the eyes of your business partners, and you will be able to provide a low-tax or 100 percent tax-exempt regime for those operations by entirely legal methods. The fact is that a non-resident company has the following advantages compared to your local company:

• Due to the fact that this company is not liable to tax in your country of residence, a non-resident company is not obliged to file financial, accounting or other reports with your country's authorities.
• If you wish you can maintain your confidentiality - in most cases the names of the owners of non-resident companies do not have to be divulged.
• The procedure of bringing goods out of the country is simplified. Usually your resident company, when it buys goods from a producer in your country, is also liable to pay VAT, which it can recover subsequently when exporting the goods across the customs border of your country. In this way, the resident company has to remove considerable sums from circulation for a certain period of time. A non-resident company is not liable for tax in your country and it is therefore able to buy the exported goods without additional formalities and VAT payments.
• Carrying out business operations with the status of a "foreigner" can greatly increase your prestige and "brand"- for it will be far more preferable for your Western business suppliers or buyers to have a prestigious Western company as a partner, rather than a small local company.
• Finally, all the profits earned by your non-resident company are preserved in their entirety and are not subject to further taxation.

When carrying out import-export and transit operations with the help of non-resident companies, it is useful to observe the following rules:

1. As regards the export of goods from your country, if the buyer is the non-resident company, the goods are normally sold at the lowest allowable price. As a result, the income of the resident company after the sale of those goods will be as low as possible.
2. As regards the import of goods into your country, if the vendor is the non-resident company, the entrepreneur has the opportunity of controlling the price of the goods purchased. If the price of the purchased goods is comparatively high, then, on the one hand, the resident company's income tax is minimized on the resale of the goods inside your country, but, on the other hand, the customs duties based on the price of goods at the border, will be correspondingly higher. If, on the contrary, the purchase price of the goods at the border is low, customs duties will be low, but the income tax payable by the company will be correspondingly higher. Therefore, in any situation, there is an optimum price, at which the total of expenditure (i.e. customs duties + income tax) will be at its lowest. That is the price the resident company should apply in buying the imported goods. One should bear in mind that if it is the intention to sell the goods inside the country, the non-resident company may be able to successfully sell the goods directly to the end user on the border. In such an event the resident formally plays no part in the trading transaction, thus avoiding taxation.
3. In the event that the goods are in transit across the territory of a particular country, it is useful to register the consignment in the name of the non-resident company. In this instance case the goods will cross the territory of the country according to the conditions of transit traffic and will not be liable for taxation.