Intellectual Property Management Services

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The Isle of Man & Intellectual Property

The Isle of Man has developed laws to protect intellectual property rights, which are based on the relevant statutes of the UK and are in line with EU IP protection rights.

The Isle of Man is also party to numerous key international treaties & conventions in relation to trademarks, patents and copyright, including:

  • The Berne Convention;
  • The Paris Convention on Patents;
  • The UK Patents Act 1977;
  • The Patent Cooperation Treaty; and
  • The World Trade Organization’s Agreement on Trade Related Aspects of Intellectual Property (“TRIPS”).

The registration of trademarks and patents in the Isle of Man are done through the UK’s Intellectual Property Office which allows potential applicants to submit an online application and means that there are no formalities required to extend UK trademarks and applications to the Isle of Man.

 

Royalties & Withholding Taxes

Royalties are payable when the owner of Intellectual property (the licensor) licences another (the licensee) to use the intellectual property.

Where the licensor is in a different jurisdiction to the licensee, often a percentage of the royalties due to be paid to the owner/licensor is payable to the tax authority in the Licensee’s jurisdiction (i.e. withholding taxes), unless there is a treaty in place that obviates the need to pay same. This percentage varies from one jurisdiction to another but can amount to as much as 30% of royalty earnings.

Reducing Withholding Taxes

Our Intellectual Property Management services utilise Royalty Routing Structures to create licensing and sub-licensing arrangements through entities in treaty friendly jurisdictions to reduce the withholding taxes payable.

So a company owning the Intellectual Property transfers it to an Isle of Man company when it is at nominal value. The offshore company then licenses the rights to use the Intellectual Property to a company in the Netherlands or Cyprus (chosen because of their vast treaty network). The Dutch/Cypriot Company then sub-licenses the rights to use the Intellectual Property in various other countries.

Here the license fees are paid to the Dutch/Cypriot Company which may be subject to low or indeed 0% withholding tax rates due to their double taxation treaty provisions.

The Dutch/Cypriot Company is paid a fee for negotiating the sub-license contracts from the royalty payment received. It pays tax on its fee income in the Netherlands or Cyprus (thereby making it compliant with the treaty provisions) and then it pays the balance held over to the Isle of Man Company free of any further withholding taxes.

 

Normally 30% of royalties are lost to taxes

Sanctuary’s routing structure saves up to 25% of overall Royalty Income

 

 

 

Intellectual Property Protection Case Study

 

An inventor decided to protect a product they created by registering a trade mark and applied for a patent.  Their Intellectual Property lawyer (the IP Lawyer) introduced the client after hearing about the Island’s robust legal system and Sanctuary Trust Limited’s intellectual property management service.

They transferred the Intellectual Property (the IP) at nominal value to an Isle of Man company.  The Isle of Man entered into an agreement with an expert licensing company in the Netherlands in accordance with the IP Lawyer’s independent legal advice.  The agreement allows the Dutch company to license the IP rights to third parties.

The Dutch expert licensing company established a holding subsidiary to sub-licence the rights to use the IP in various other countries.

The Dutch holding subsidiary is fully tax compliant and pays all taxes due on the royalty payments received.  It takes a small fee for negotiating the sub license contracts from the Royalty payments and the balance is then paid up to the Isle of Man company free of any further withholding taxes.

 

The details of this structure and its operation are provided for information purposes only.   You should not place reliance on the efficacy of this structure in relation to your own circumstances as the type of structure which may be adopted may be different in your case.  The decision as to how to structure your affairs, depends upon your personal situation and we recommend that you obtain both independent tax and legal advice. 

 

Benefits of using Sanctuary Trust for Intellectual Property Management

  1. Withholding Tax Benefits – our Royalty Routing Structures could increase the amount actually earned by the Isle of Man company by up to 30%
  2. Income Tax Benefit – By using an insurance wrapper or hybrid holding company above the IOM Intellectual Property Holding entity (depending on the domicile and residence of the Beneficial Owner), the income tax generated by the use of the Intellectual Property can legitimately be deferred by the beneficial owner.
  3. Capital Gains Tax Benefit – Where the Intellectual Property is sold, no Capital Gains Tax is payable in the Isle of Man (compared to 20% in the UK) and if an appropriate holding structure is put in place above it, the Capital Gains Tax otherwise payable to the Beneficial Owner’s relevant tax authority can be deferred until such time that it is remitted to the beneficial owner.
  4. Sanctuary Trust already has existing relationships in place with licensing entities in the treaty jurisdiction, necessary in order to acquire the Withholding Tax ‘savings’.
  5. The structured corporate ownership of the Intellectual Property provides asset and wealth protection.
  6. The Isle of Man has a similar corporate, commercial and legal system and infrastructure to that of the UK and it uses the Privy Council as a court of appeal. This provides UK domiciled and resident people a degree of familiarity and comfort when trading.
  7. The Isle of Man has a sound and tested commercial infrastructure and access to all the large UK banks and can trade using multicurrency accounts
  8. Sanctuary Trust employs a professional team of mostly lawyers and chartered accountants who are accustomed to dealing complex international trading transactions and who can assist with co-ordinating these cross-border deals and relationships whilst offering clients a speedy and professional service.
  9. Using an Isle of Man 2006 Act Company gives confidentiality to the Directors & Shareholders

 

Contact Us

Our team of professionals are available to assist with any queries on the Isle of Man and intellectual property

 

Disclaimer

We provide no warranty that the information contained herein is accurate, up-to-date or complete and in no circumstance does the Information constitute legal, tax or any other form of advice. You are responsible for independently verifying the information provided in this information sheet (the ‘Information’), if you intend to rely upon or use it in any way. In appropriate circumstances, this may necessitate that you obtain independent tax or legal advice. This information includes Information provided to us by third parties and that Information may not have been vetted by us. You use the Information at your own risk.
We disclaim all responsibility to the maximum extent possible under applicable laws:

  1. All implied warranties in relation to the Information are excluded.
  2. We exclude all liability, including for negligence, to you arising directly or indirectly in connection with the Information.