Setting up further sales subsidiaries

"The prime manufacturing costs of magnifying lenses are now considered sufficiently low to enable Polycon Manufacturing Company to have a separate assembly and packaging department so that the group can make direct sales to wholesalers and distributors in markets around the world. However, Polycon Manufacturing Company is not located in a country from which sales could effectively be made and Luna Technics Company is far too technically orientated for products, which have mass consumer appeal. Mr Holmes considers it commercially necessary to have a minimum of four active sales subsidiaries in the Far East, Middle East, Europe and the American continent, which may need to be increased in number as the group grows."

Many factors may determine the exact location of the four or more sales subsidiaries of Polycon Lens Company. Tax considerations may be relevant in deciding where to locate the sales subsidiaries, and these concessions may range from taking advantage of freeports where available, so that customs duties may be avoided on goods which are imported by sales subsidiaries for export purposes, to offshore trading company concessions which may be relevant, and a tax haven company may even be considered.

Although inter-company pricing policies may come under scrutiny, additional profits may be earned by Polycon Manufacturing Company by means of charging interest on unpaid sales contracts with the four subsidiaries Polycon Sales (Far East), Polycon Sales (Middle East), Polycon Sales (Europe) and Polycon Sales (America) which interest would normally not attract foreign withholding taxes if a tax treaty is in force between Countries D and Countries E, F, G, and H.

Date: 2015-01-29; view: 849