An invoice company refers to a business entity that is established in a jurisdiction with low or no taxes. The primary purpose of creating such a company is to shift profits to that jurisdiction, often as part of a transfer pricing strategy. Transfer pricing involves setting the prices for assets, services, and funds exchanged within a corporation, which can impact the overall tax liabilities of the company.
Invoice companies are commonly discussed in the context of international tax law and corporate finance. They may be involved in legal practices related to:
Users can manage related legal matters using tools like US Legal Forms, which provide templates drafted by attorneys for various legal documents associated with corporate and tax law.
Here are a couple of examples of abatement:
Example 1: A multinational corporation sets up an invoice company in a country with favorable tax laws. This company invoices other subsidiaries for services provided, allowing the corporation to reduce its overall tax burden.
Example 2: A technology firm creates an invoice company in a jurisdiction with no corporate income tax. The firm charges its other divisions for software licenses, effectively shifting profits to the invoice company. (hypothetical example)
Examples of state differences (not exhaustive):
| State | Tax Treatment of Invoice Companies |
|---|---|
| Delaware | Favorable tax treatment for corporations |
| California | Higher corporate tax rates; scrutiny on transfer pricing |
| Florida | No state income tax, attracting invoice companies |
This is not a complete list. State laws vary, and users should consult local rules for specific guidance.
| Term | Definition | Key Differences |
|---|---|---|
| Transfer Pricing | The method of pricing assets, services, and funds between related entities. | Focuses on pricing rather than the establishment of companies. |
| Tax Haven | A country or jurisdiction with low tax rates. | Tax haven refers to the location, while invoice company refers to the business structure. |
If you are considering setting up an invoice company, it is essential to:
For complex situations, seeking professional legal help is advisable.
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