So large tech companies are known for having some side 'off shore' company in a 0% tax country (like, but not exclusively, The Bahamas), which charges royalties at approximately the same amount, as the profit made by the 'on shore' company. (Slightly more convoluted variations exist, but that is the general idea).

This means the 'on shore' company does not pay any corporate tax (only indirectly paying some via the income tax payed by/for the minimal staff employed in the host country)

This can be seen as an unfair taxation and business advantage, multinational companies have (over local ones).

However is my understanding correct, that if a host country has a GST/VAT tax system (n.b. not a (final)sale tax) then the company may be able to avoid company tax (at say 33%) but would still need to pay GST/VAT (say 20%) on the full amount of imported goods (e.g. branding IP which royalties are paid on) or services?

Short version: Do multinational companies pay their fair amount of GST/VAT on import royalties/services? Any Caveats?


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