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BUSINESS GUIDE: LOCATION

This is not the place for an essay on how to choose an offshore jurisdiction - individual circumstances vary so widely that specific professional advice is an absolute requirement. However, it is possible to indicate some of the issues that need to be taken on board when beginning to make choices.

Legal and Fiscal Considerations

Although most, if not all, jurisdictions have professionals able to offer advice on establishing companies, opening bank accounts etc, many complex legal and tax factors impinge on the choice of jurisdiction for an e-commerce operation, and local advice in any particular jurisdiction is likely to be less than objective. Therefore, it is probably necessary to use internationally-competent professionals to make initial choices; then it will be OK to use cheaper local professionals to make the detailed arrangements and to maintain them.

Tax is an obvious concern, both in terms of the relationship of a jurisdiction to the home country of a given operation, or to the domiciles of its shareholders if they are spread around, and in terms of VAT or sales taxes. See our Tax Law section for some further details on the VAT point in particular.

Legality in general is another concern, especially in view of the Bush administration's 2006 decision to effectively ban online gambling for US punters. Financial products and the marketing of them is also a highly regulated area - an e-tailer of funds, for instance, would have to consider the status of a given jurisdiction in relation to each national market from which clients might emerge. Selling toys is no doubt less sensitive, but there is still product liability, distance selling, data protection and so on.

Technical Considerations

E-commerce operations have certain needs that traditional enterprises do not; thus there is a certain level of technical and infrastructure development that an offshore jurisdiction as a country must attain before it before it can qualify as a suitable location for an e-business. This can be summarised as follows:

Modern and reliable telecommunications facilities

Any site will have to be accessible 99.9% of the time. The volume of Internet traffic that a telco's infrastructure would be able to handle is also vital. Depending on the type of business being conducted from the site, the amount of bandwidth or network capacity is also of importance.

A source of technical expertise

Initial establishment of a site, involving installation of hardware and software (often rather complex for a substantial e-commerce application) could conceivably be supervised from another country, but ideally there would be a local IT company able to do the job, even if only as a sub-contractor. Certainly, there will be an ongoing maintenance need which absolutely has to be satisfied locally; down-time is a no-no for an e-commerce operation. Does the jurisdiction have the pool of people to be able to satisfy these needs? Again, for many smaller offshore jurisdictions, the pool will be limited and skill levels may not be that high.

From a technical perspective, the offshore jurisdictions which are most likely to offer suitable facilities for e-commerce are those in the following list: