The attempt by CCS Group Ltd. to use Bermuda as an offshore centre for Internet transactions has come under the spotlight in a Canadian business magazine.

The magazine noted Revenue Canada is concerned that companies like CCS subsidiary First Atlantic Commerce Ltd. will help onshore companies avoid taxes on commerce done over the Internet. The transactions are referred to as e-commerce.

"Bermuda, like a few other countries around the world, is a tax haven,'' the twice-monthly Canadian Business declares. "Thanks to that attraction, multimillionaires have flocked to the Island for decades. So have a handful of footloose companies.'' First Atlantic was set up to leverage the Island's lack of corporate tax on profits. Offshore companies are required to set up an exempt company on the Island and then open an account at one of the local banks.

The companies' customers will use First Atlantic's secure, Internet credit card transaction processing gateway in Bermuda as a means of avoiding taxes they would normally pay at an onshore location.

The magazine features Canadian Greg Vasic, who along with Steve Cullimore and Don Mackenzie are the principals in CCS.

The magazine notes First Atlantic has signed up four clients for the service.

There are two ways Revenue Canada could attempt to get back the taxes according to Chuck Ormrod, a KPMG tax partner who is quoted in the article.

"First of all, if you try to fold up shop in Canada and plunk your business down in Bermuda, the transfer may be seen as a disposition of property,'' the magazine states, adding that the classification could mean a big tax bill.

Mr. Ormrod advises owners that they're better off setting up an entirely new company in Bermuda. He estimates the paperwork could cost at least C$50,000 in professional fees.

"But to avoid taxes you will still have to satisfy Revenue Canada that your new Bermudian subsidiary is a completely different creature from its Canadian parent,'' the magazine states. "...In addition, the friendly folk at your local tax office may insist on taking a close look at where you warehouse your products and how you distribute them to customers. If they figure that your real business lies in Canada with only nominal sales and accounting presence in Bermuda, they're not likely to give you a pass on your taxes.'' Meanwhile a Revenue Canada official is quoted as saying the Government is concerned with e-commerce companies operating out of a foreign jurisdiction, doing business in Canada and avoiding paying income tax on profit.

TAXES TAX BUSINESS BUC