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Toyco is a newly-established company which will retail toys exclusively through the Internet from its headquarters in an offshore jurisdiction. It is owned by two Canadian businessmen, who between them have previous experience of offshore companies, e-commerce and toy retailing; they see substantial tax and cost advantages to be gained from an offshore location.

The company and web site are to be based in the British Virgin Islands, as one of the directors has contacts with that jurisdiction. The BVI has an established financial industry and its infrastructure is good enough to support e-commerce enterprises. The site will be the sole means of ordering goods, with marketing being a mixture of Internet and printed media advertising. The two owners plan to live in the BVI and run the business from there. They will need work permits, but these will be issued without demur since they intend to employ a number of local administrative staff. Since the local supply of skilled workers is limited, it may be necessary to hire one or two expatriate computer technicians, who will also need work permits.

Toyco intends to source its supplies from around the world, with procurement being handled from the BVI, but bulk deliveries being made to warehouses in the US and the EU. Warehousing and customer delivery arrangements are to be outsourced to Interhouse, an established company with 40 years' experience of warehousing and fulfilment for consumer goods in international markets. Although Toyco could probably have maintained an EU warehouse without damaging its tax status, it would have been more difficult in the US; and Toyco sees no need to create subsidiary operations with their own managerial demands if adequate alternatives already exist.

Toyco's development programme is as follows, involving a BVI firm of lawyers (BVLAW), a BVI Internet Service Provider (BVISP), a Toronto e-commerce platform designer (TECP), and Interhouse.

• Establishment of Toyco (BVI) Ltd (BVLAW)
  
• Web-site design, with interactive catalogue, ordering facilities, shopping cart, tax/duty calculation (TECP)
  
• Multi-currency payment and customer account management packages sourced and integrated into site (Toyco; TECP);
  
• Negotiation of banking and credit card facilities including merchant ID and clearance procedures (Toyco);
  
• Development of customised inventory control, despatch and Interhouse/Toyco billing routines (Toyco, Interhouse, TECP);
  
• Co-location of the web site at BVISP's facilities (BVISP).
  

Interhouse are to handle importation formalities, and will take responsibility for the payment of import duties and VAT in the EU or (in the US) sales taxes on final customer delivery. All customer payments are to be processed in the BVI, and will include charges for import duty and VAT/Sales Tax when applicable. Interhouse invoices to Toyco will include import duty and VAT/Sales Tax expenses as well as billing for import clearance, warehousing and despatch.

Toyco (BVI) Ltd will be incorporated as an International Business Company, and will be exempt from taxation in the BVI. The BVI has a sophisticated financial infrastructure which will be able to support Toyco's future expansion without difficulty. Toyco expects to move on to Internet procurement and freight transport handling in the near future.