It is easier to decide to take the business offshore but finding the best is difficult to determine. Each business has its own predicaments and conditions that make their best country different from other business's best country and in addition to it, there are some cases where a just a few small details could transform an entire strategy.
Thus, it's significant to prepare a comprehensive plan before moving the IP offshore.
There is no fixed reply to the question, "Which is the best jurisdiction for low tax IP services?" as mentioned above, it depends on company to company and their prerequisites. Still, there are some suggested locations that many companies opt for according to their preference.
Mauritius is an evolving offshore banking market and is one of the low tax IP paradises. However, not a zero-tax jurisdiction.
All corporate revenue accumulated in or subsidized from a Mauritius company is subject to a 15% corporate income tax rate. The same rate is put on to IP royalties in the form of a withholding tax.
Mauritius government has initiated a plan to reinforce the protection of IP rights, consisting of incorporating international treaties on industrial property act. The new bill will direct patents, utility models, layout designs, the Patent Cooperation Treaty, industrial designs, the Hague Agreement, the protection of new varieties of plants, along with marks, trade names, geographical warnings, and the Madrid Protocol.
This will make problems concerning IP in Mauritius much handier, a good characteristic for single entrepreneurs wanting to transfer their IP to an offshore jurisdiction.
The best low-tax country for intellectual property is Luxembourg. Luxembourg companies are among the alternatives to control trademarks and patents.
Although generally being assumed as an offshore harbor, but the country is not tax-friendly and, in fact, levy tax on corporate profits at around 28%. Nevertheless, Luxembourg has not once had any explicit withholding tax rules which have endorsed it to play the part of an arbitrator, on the condition that its entrance to tax treaties will be considered as part of Europe.
The issue confirms that economic activities meet Luxembourg's conditions, and the requirements have been stricter in recent years because of new anti-money laundering laws.
Under Swiss law, trademark rights and copyright deplete globally and patent rights locally. Switzerland provides affluence of IP rights from patents to trademarks and copyright to assign rights.
New certified inventions can be secured in Switzerland for the utmost time of 20 years, and pharmaceuticals and pesticides can be approved for further five years after the original 20 year period. Trademarks are secured ten years after registration, which can be renewed for an additional ten year period without limitations.
Given that the IP is traded as part of an individual's private assets, the profits from such a sale are not chargeable. Still, if the sale of the IP is a part of an individual's business or partnership assets, income taxes are due at standard rates on all IP-based income.
Taxes in Switzerland could be as low as 17% and do not go beyond 40%, but those rates aren't low enough to toggle around with. If you are to keep your intellectual property in Switzerland, make sure it is registered as a private asset.
- Trademarks projected for or presently in use in Hong Kong can be a file with the jurisdictions Intellectual Property Department (IPD), and this structure works on a "first to use" basis. This means that IP rights to a particular trademark are based on who used it initially instead of who was the first to enroll.
- Patents are approved in Hong Kong on a "first to file" basis rather than the first person to invent the product. Short-term patents do not involve as many regulations and inquiries. It can be granted for a far more low cost and in less time.
- Copyright is approved spontaneously in Hong Kong just when created. Still, it is commended that any authors, artists, or programmers should ascribe a copyright contract to their work along with their name and the date of publication.
The downside of choosing Hong Kong for IP offshore is that even though favorable tax policies for businesses, income that is consequent from a Hong Kong trade, profession, or business carried out in Hong Kong is taxable business. While certainly not terrible enough, it's not the best you can get.
In Dubai, costs for the IP registration are nominal, and perks of a tax-free jurisdiction can be enjoyed. Since the United Arab Emirates is a tax-free jurisdiction, the solitary fees that need to be paid are for recording a license or register the invention.
In Dubai, patents are granted for 20 years, utility models for10 years, trademarks must be listed to be secured from Dubai's IPPD, design rights are also registered with the IPPD, and protection is stretched for up to 10 years.
Hungary is one of the best European countries to register your IP and is considered a rising star among IP-holding locations. The country bids IP rights for patents, trademarks, industrial property, trade secrets, software, and other assets that perform as patents such as designs, plant variety types, medicinal products, etc.
The Cayman Islands, in recent times, proposed encouraging changes to its laws concerning intellectual property rights. Patents, copyright, and design rights still follow the old law of first registering a mark in the UK and then request an extension to the Cayman Islands.
But the jurisdiction has initiated the process to create in IP rule autonomous from the UK, which can only imply positive things for the autonomy of the Cayman Islands. This is particularly promising that there is no corporation, income, or withholding tax levied in the Cayman Islands.
THE NETHERLANDS, THE UNITED KINGDOM, BELGIUM, AND DENMARK
Even though they do not offer extensive plans for IP rights, there are several countries that you may want to take into attention for further IP tax planning.
- Netherlands provides a 5% rate for self-developed patents, which can also be used for non-patent related exercises if an R&D certificate has been permitted. The lack of royalty withholding tax makes the Netherlands a catchy intermediary jurisdiction.
- Belgium offers an 80% discounting rate for income derived from patents accredited in the country, making the effective tax rate in Belgium 6.8%. However, the IP rights provided in Belgium are narrow, and a royalty withholding tax of 15% is applied.
- In 2009, the United Kingdom announced that it would join the IP bandwagon as well. However, they too restricted their IP regime to patents, removing copyright on computer software and trademarks. While not as low as the 2% that is offered in Cyprus, comparing with the UK's 24% corporate tax, the rate of 10% for intellectual property is quite decent.
- Denmark does not have an IP rule; it could provide a fascinating solution for copyright structures. Denmark's domestic definition of royalties doesn't include copyright, meaning that the royalty withholding tax does not apply to royalties paid on copyright in Denmark.
Identifying the IP asset structure timely in the development stage will warrant better flexibility down the road to transfer assets and enjoy the profits from the creations. While it does require greater due diligence, it is an important step that should not be skipped.
Our proficient experts at Business Setup Worldwide are at your service to guide you through all your queries. Contact us today to start your offshore company at once and plan accordingly that would make your profits grow inherently.