Transformations  in
Business & Economics

THE BREAK-EVEN POINT CALCULATION IN ONSHORE AND OFFSHORE BUSINESSES IN REGARDS TO TAXATION
Samer Khouri, Michal Istok, Andrea Rosova, Martin Straka

ABSTRACT. This paper deals with some tax avoidance activities that provide opportunities for legal entities to capitalize on differences in tax rates, tax preferences and tax status in a number of elaborate ways. The first part of the paper provides the background to the theoretical model by reviewing expert opinion on onshore and offshore business practices, the motivation for tax avoidance strategies, and measures that may improve tax compliance. The second part presents a model of the breakeven point calculation in the setup process of a corporate structure with direct or indirect capital ties. For ease of calculation the simulation involves a corporate structure without capital ties. Even simplified modelling with transfer pricing is relatively complicated. Furthermore, in compliance with the key principles of this model, a mathematical representation of the proposed model solution without capital key (direct capital connection) will be elaborated. Finally, this model will be applied to Slovak companies, taking into consideration the current legislative and tax restrictions as well as the Slovak business environment, in order to estimate the convenience of engagement in onshore or offshore businesses  .

KEYWORDS: breakeven point, onshore and offshore business, tax avoidance, tax optimization, trade-off model.

JEL classification: G17, G40, H21, H25, H26, M13.