International Trading Company: Imports, Exports and Tax

An international trading company is a legal entity that buys goods from a manufacturer in one country and sells them to a buyer in another, taking on the contracts, payments and part of the delivery risks. It is often registered in an offshore or low-tax jurisdiction such as Hong Kong, yet taxes and customs are still determined by the route of the goods, the place of management and the countries of sale. That is why the structure is built from the supply chain to the choice of country.

Roles in the supply chain

Before choosing a jurisdiction, set out who is responsible for the goods at each stage:

• the seller and the buyer under each contract, including the intermediary;
• the owner of the goods on each leg of the journey and the moment title passes;
• the importer (importer of record), who files the customs declaration and pays duties and import tax;
• the carrier, the warehouse and the insurer;
• the recipient of the money and the bank through which the factory is paid.

The costs, risks and delivery obligations of the parties are allocated by the International Chamber of Commerce's Incoterms 2020 rules: these are 11 three-letter terms, such as FCA, CIF, CIP, DAP and DPU. Incoterms do not govern the transfer of title or payment terms; these are set out in the sale contract itself. If the trading company sits in the middle of the chain, its contracts with the factory and with the buyer must be aligned on delivery terms, otherwise the risk of damage to the cargo or non-payment will fall on it without insurance.

Customs: EORI and imports into the EU and the UK

Customs operations in the European Union require an EORI number. A company without an establishment in the EU needs one if it files customs or summary declarations itself or acts as a carrier. It registers in the EU country where the first declaration is filed.

Separate rules apply to small consignments sent to individual buyers:

• EU. Since July 1, 2021, VAT has been charged on imported parcels of any value. For consignments up to €150 the Import One Stop Shop (IOSS) scheme applies: the seller registers in one EU country and charges VAT at the point of sale. From July 1, 2026, a temporary customs duty of €3 per item by tariff classification has been introduced on such parcels; the seller or importer declares and pays it.
• United Kingdom. Since January 1, 2021, when goods in a consignment of up to £135 located outside the country are sold, the overseas seller charges UK VAT at the point of sale and registers with HMRC. When goods are sold through an online marketplace, the marketplace itself is treated as the supplier for VAT purposes.

For retail sales through a website and marketplaces, see the separate guide company for an online store.

Where the intermediary's profit is taxed

The country of registration sets the tax rate; the company's functions and the place where they are performed set the amount of tax. Tax authorities examine three questions:

1. Source of profit. Hong Kong charges Profits Tax only on Hong Kong-sourced profit: 8.25% on the first HK$2 million and 16.5% on the remainder. The source is determined by the facts: where contracts were concluded, where the work was done and who made the decisions. For members of multinational enterprise groups the FSIE regime has applied since 2023, under which certain types of foreign-sourced income received in Hong Kong are taxed if the exemption conditions are not met. Company requirements are covered in more detail on the page offshore company in Hong Kong.
2. Place of management. Singapore taxes profit at 17% and treats a company as tax resident when the control and management of its business are exercised in Singapore. The two Asian hubs are compared in the guide Hong Kong vs Singapore.
3. Prices between related companies. If the intermediary belongs to the same owners as the buyer or seller, the markup must meet the arm's length principle of Article 9 of the OECD Model Tax Convention. The calculation methods are described in the 2022 OECD Transfer Pricing Guidelines.

The owner's country of residence is assessed separately: its controlled foreign company rules may include the intermediary's profit in the owner's personal tax base. We explain the mechanics in the article CFC: controlled foreign company rules.

The bank and transaction documents

A trading company's bank checks why the money comes from one country while the goods travel by another route. For account opening and the first large payments, prepare:

• contracts with the supplier and the buyer, invoices and specifications;
• transport documents, customs declarations and insurance policies;
• an ownership chart down to the ultimate beneficial owners and tax residency information;
• an explanation of the intermediary's economic purpose: purchasing, logistics, financing, handling claims.

If the company has no people or functions and only re-invoices, the bank and the tax authorities are highly likely to ask whether the transactions are genuine. How to prepare for the bank is described in the article bank account for a foreign company.

A two-year budget

On top of the cost of registration, add:

• annual company maintenance, the secretary or agent, and bookkeeping;
• a customs broker, duties and import tax in the countries of import;
• currency conversion, bank fees and trade finance;
• cargo insurance and the cost of returns;
• an audit and tax filings where they are mandatory.

Calculate three scenarios: no revenue, planned turnover, and a scenario in which the bank or payment service holds back payouts.

Checklist before registration

• The physical route of the goods is mapped, and the route of the money separately.
• For each contract an Incoterms rule is chosen and the moment title passes is stated.
• It is clear who the importer is in each country of import and whether they need an EORI.
• The intermediary's functions are described: who negotiates, who signs contracts and from where.
• CFC rules and the owners' tax residency have been checked.
• A bank or payment institution has confirmed in advance that it is ready to work with this model.

Next step

Which contracts, turnover forecasts and documents on funds a bank expects for currency payments is covered in the article on currency settlements of a foreign company. For online sales paid by card, the payment provider becomes a question too: see payment processing and acquiring.

Send us, via the form, a description of the goods, the countries of suppliers and buyers, the owners and the expected turnover. Offshora will compare 2–3 structure options with two-year costs and a list of documents for the bank. Submit a request. The general table of jurisdictions is in the offshore jurisdictions section.

All Offshora guides · Practical guides: all articles