Enterprise Intangible Assets: Offshore Scheme

In international practice, it is very common to use foreign, primarily offshore, companies to own intellectual property (copyrights, patents, trademarks, etc.). The fact is that intellectual property is the most mobile type of property, easily allowing transfer to a foreign owner.

Implementation of an offshore scheme by HMA

Therefore, the natural tendency is to move such property to those jurisdictions where its operation (that is, the receipt of royalties - royalties for granting the right to its commercial use) is associated with the least tax losses.

Since most offshore zones do not have tax treaties with developed countries, when paying royalties to an offshore company in the country from which the income is paid, a withholding tax is levied. In certain cases, the payment of tax can be avoided or its rate reduced if a company from a taxable country with which there is a tax agreement is used as a transit element in the scheme.

In this case, the offshore company, the owner of the intellectual property, transfers the license not for its use to the transit company, but the latter issues a sublicense to the end user. In particular, the use of Dutch companies as such a transit element is widespread, since the Netherlands does not levy withholding tax on outgoing royalties, and therefore royalties are transferred to the offshore company without additional losses.

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