Offshore taxation of copyrights, patents and intellectual property

An offshore company can buy and use copyrights, patents, trade-marks, and possess know-how and franchise rights. The offshore company can hand out sub-licenses, then can exploit its intellectual property in different countries, too.  These super-efficient and trendy offshore taxing methods are worthy of planning very thoroughly, because countries with high taxation can lay withholding tax on the source of the royalty payments. In such a case, it’s highly recommended, to pay extra attention to agreements made for bypass double taxation, because this way the amount of payable withholding tax can be reduced.

Offshore companies, managing intellectual rights, are especially efficient, when dealing with Internet-based businesses, for example possessing domain-names in tax-free environments. They are also exquisitely convenient to market non-pecuniary products on-line. Moreover, the high-tech, Internet-based businesses seem to be specifically developed, to plan their taxation with the help of an offshore company.

“Intellectual right is the overall name used for creations protected by copyrights and industrial property. Owner of intellectual creation is entitled to royalties for the utilization of his work. This includes every kind of allowance, which is paid for copyrights of literary-, fine art-, scientific-, film products, or using (or possessing common rights to) patents, softwares, brands, industrial designs, models, secret formulas.” (Here you can read further informations about tax planning concerning intellectual rights.)

The taxation of companies connected to intellectual rights, patents and brands is reduced and made enticing in more and more countries, because they are intent on allure settling more and more companies and investors, in need of high knowledge.

Practical use of an offshore company/holding formed for tax planning

After acquiring the rights, the offshore company enters into a license- or franchise contract with the enterprises interested in utilizing the intellectual rights. The revenue coming from this contract is offshore, so it is tax-free or is accumulating in a place with decidedly low taxes. To reduce withholding tax, one can insert a second company in the taxation process.

A classic solution is, to hand over the profitable  patent, copyright or brand to an offshore company, before its value significantly rises. The company, holding possession of the intellectual right, will sell the common rights to third parties. Most software developer companies works this way, usually they are registered in low tax or offshore countries. It also my occur, that the company, possessing the rights, is not in an offshore country, but the holding company, which owns the former one, is in such a place.

The number of taxation planning solutions are almost infinite, but there are particular countries, where these offshore tax-reduction solutions can be applied very efficiently:

– software-development

– copyright management (books, publications, music, films, etc.)

– qualification processes, publishing tasks, professional certificate-issuances, etc.

In the next chapters of our series, connected to intellectual rights and taxation planning, we will introduce the possibilities of the most popular low-tax jurisdictions.


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