Offshore company to hold only IP, bank account not needed

[MrSoolmaan]

Hi Everyone,

What would a good and cheap option be to set up an offshore company that will hold intellectual property (website/trademark). The company does not need a bank account, just so that company will hold the IP.

Thanks!

 

[Spinat]

If you look for something trustworthy, I would look in the direction of Cyprus, Malta and BVI - if you don't care about credibility you can setup the thing in the Seychelles for less than USD 800!

 

[James Turner]

There are some locations that have blocked IP holding as an activity now so I would suggest using a professional who understands what is and is not possible in each location for this. It is essentially a very simple requirement though.

 

[Clip]

Why not Wyoming? It's cheap and quick to create and hard to sue

 

[Loizos]

Hi Everyone,

What would a good and cheap option be to set up an offshore company that will hold intellectual property (website/trademark). The company does not need a bank account, just so that company will hold the IP.

Thanks!

Cyprus is one of the most credible jurisdictions for IP in the EU. Otherwise BVI (which you will need to have presence based on new regulations) or Belize.

 

[MrSoolmaan]

which you will need to have presence based

What do you mean with 'need to have presence based'?

 

[James Turner]

I'm not sure Cyprus is particularly credible for IP over any other location to be honest, but BVI or Belize impose certain requirements for substance essentially where IP is concerned meaning that these locations are no longer particularly appealing for IP holding entities.

 

[Loizos]

What do you mean with 'need to have presence based'?

Economic Substance refers to new legislation introduced in the British Virgin Islands (BVI) which derives from an EU based unfair tax practices initiative that requires certain entities that are incorporated or registered in the BVI, and which conduct one or more of a set list of nine relevant activities, to comply with local requirements and demonstrate adequate ‘economic substance’. The BVI legislation follows closely the approach taken by the Crown Dependencies of the UK (Jersey, Guernsey and the Isle of Man) and the other UK Overseas Territories including the Cayman Islands and Bermuda.

The legislation imposes economic substance requirements on companies incorporated or registered in the BVI and limited partnerships with legal personality that are formed or registered in the BVI (together, relevant legal entities), which carry on one or more of the following relevant activities:

Banking
Holdings Business
Insurance
Fund Management
Headquarter Business
Finance and Leasing
Distribution
IP
Shipping


https://www.bvifsc.vg/library/legislation

 

[Loizos]

I'm not sure Cyprus is particularly credible for IP over any other location to be honest, but BVI or Belize impose certain requirements for substance essentially where IP is concerned meaning that these locations are no longer particularly appealing for IP holding entities.

Background Cyprus IP regime is fully compliant with international developments in the tax treatment of IP income and OECD’s guidance. The IP regime has been reviewed by the EU Code of Conduct and has been assessed as fully compatible with EU standards. Benefits of the Cyprus IP regime 80% of the profits qualifying for the regime are exempt from tax. With a corporate tax rate of 12.5%, this can result in an effective tax rate of as low as 2.5%. Relevant details of the regime Under the Cyprus IP regime, 80% of the qualifying profits generated from the qualifying assets is deemed to be a tax deductible expense for qualifying taxpayers. In calculating the qualifying profits, the new regime adopts the ‘Nexus’ approach. According to this approach, the level of the qualifying profits is positively correlated to the extent the claimant performs R&D activities to develop the qualifying asset (QA) within the same company. Qualifying assets Qualifying assets under the new regime include: • patents, • copyrighted software programs, and • other intangible assets that are non-obvious, useful and novel. Qualifying assets do not include trademarks and copyrights.

 

[MrSoolmaan]

Thanks for the reply!

But something I don't understand, the company should only hold the IP so no bank account. What has tax got to do with the company then?

 

[Martin Everson]

But something I don't understand, the company should only hold the IP so no bank account. What has tax got to do with the company then?

Very little if the IP company is not receiving royalties etc as there is no tax liability. I guess you just want to ring fence the IP? You could use a UK company for that. I wrote a thread on cheap UK company setup if your search forum. Just make sure you declare it all to your taxman and do annual filing. You need to do this as taxman does not know company has no activity unless you tell them sadly.

 

[James Turner]

Background Cyprus IP regime is fully compliant with international developments in the tax treatment of IP income and OECD’s guidance. The IP regime has been reviewed by the EU Code of Conduct and has been assessed as fully compatible with EU standards. Benefits of the Cyprus IP regime 80% of the profits qualifying for the regime are exempt from tax. With a corporate tax rate of 12.5%, this can result in an effective tax rate of as low as 2.5%. Relevant details of the regime Under the Cyprus IP regime, 80% of the qualifying profits generated from the qualifying assets is deemed to be a tax deductible expense for qualifying taxpayers. In calculating the qualifying profits, the new regime adopts the ‘Nexus’ approach. According to this approach, the level of the qualifying profits is positively correlated to the extent the claimant performs R&D activities to develop the qualifying asset (QA) within the same company. Qualifying assets Qualifying assets under the new regime include: • patents, • copyrighted software programs, and • other intangible assets that are non-obvious, useful and novel. Qualifying assets do not include trademarks and copyrights.

Whether income will be generated by the IP has not been discussed and therefore how relevant the tax regime of the holding company is has not been established. More importantly the compatability of the IP tax regime with EU standards as mentioned in your post earlier, may or may not be relevant at all to the contributor. The information on Cyprus may of course change the position, but more information would be needed to see whether that is applicable or not. In most cases a location that protects the owner of the IP is sufficient.

 

[John Andrews]

Very little if the IP company is not receiving royalties etc as there is no tax liability. I guess you just want to ring fence the IP? You could use a UK company for that. I wrote a thread on cheap UK company setup if your search forum. Just make sure you declare it all to your taxman and do annual filing. You need to do this as taxman does not know company has no activity unless you tell them sadly.

Can this be done with domain names (UK dormant company which holds a few domains)? What if you want to sell the domain to someone?

 

[Martin Everson]

Can this be done with domain names (UK dormant company which holds a few domains)? What if you want to sell the domain to someone?

You need to speak to an accountant. Questions such as do you enter the domain name on the companies books at the market value you bought it at need to be answered. Also will you then have to pay capital gains tax on the difference between the price you entered it on the companies books at and the price you sold it at? I would say the answer is yes to both questions. Personally I would go far offshore for this. I just saw news that Labour want to increase UK corporate tax to 26% if they come into power

I take back my idea of using UK company for IP due to low cost alone. The UK political risk, tax changes, brexit etc is too high for my tatste. Find another far offshore jurisdiction as tax today is no concern for you until later date. You can always declare the offshore company and move residency to a tax free country before any sale. Plenty of people do this all the time with larger businesses.

 

[blockchain4ever]

You can always declare the offshore company and move residency to a tax free country before any sale. Plenty of people do this all the time with larger businesses.

Except for the exit tax that's becoming more or less mandatory across EU, yes.

 

[Martin Everson]

Except for the exit tax that's becoming more or less mandatory across EU, yes.

Very true

 

[justsomeguy]

Why not Wyoming? It's cheap and quick to create and hard to sue

Agreed

 

[Clip]

Also because being a US company it has more power to enforce IP overseas

 

[unicorn]

Economic Substance refers to new legislation introduced in the British Virgin Islands (BVI) which derives from an EU based unfair tax practices initiative that requires certain entities that are incorporated or registered in the BVI, and which conduct one or more of a set list of nine relevant activities, to comply with local requirements and demonstrate adequate ‘economic substance’. The BVI legislation follows closely the approach taken by the Crown Dependencies of the UK (Jersey, Guernsey and the Isle of Man) and the other UK Overseas Territories including the Cayman Islands and Bermuda.

The legislation imposes economic substance requirements on companies incorporated or registered in the BVI and limited partnerships with legal personality that are formed or registered in the BVI (together, relevant legal entities), which carry on one or more of the following relevant activities:

Banking
Holdings Business
Insurance
Fund Management
Headquarter Business
Finance and Leasing
Distribution
IP
Shipping


https://www.bvifsc.vg/library/legislation

+++


small question : does this imply that for all OTHER activities, there is no substance requirement ? There are many small online consulting or coaching or services or marketing or management or freelance or ... business owners / start ups out there (including myself) who are looking for a hassle free company in terms of audit, accounting, filing, reporting, next to tax friendliness and operational. BVI companies seem to have access to many good banks and can even have a Neat online business account ... (only few countries can). BVI = 0 % corporate tax, 0 % income tax, 0 % dividend, rents, ...

perhaps a BVI could be a solution for online SMB's and/or freelancers looking for convenience ?



About Cyprus & IP : I read somewhere these were called IP boxes and have been exterminated by the 'higher powers' ... looks like everything that can benefit small entrepreneurs too, must go. Strange we never heard of an attack on the trusts ... because that is where the most and the most black and the oldest money is sitting ...

 

[JohnLocke]

Strange we never heard of an attack on the trusts ... because that is where the most and the most black and the oldest money is sitting

I totally agree with you. They are in a process to remove everything that the small man could hide there last safings. The Elite of this world, the 1% will keep their money holes a live and no one will ever touch it.