BVI

BVI Trusts

The trust system in the British Virgin Islands

British Virgin Islands trust law is based predominantly on English trust law but has developed beyond English law to permit purpose trusts, extend the perpetuity period to 100 years and most notably to create the unique VISTA trust. The governing law is the Trustee Ordinance Act 1961 (“the Act”) (most recently updated by the Trustee (Amendment) Acts of 2013 and 2015) and is supplemented by the Virgin Islands Special Trusts Act 2003 (the “VISTA legislation”) (most recently updated by the Virgin Islands Special Trusts (Amendment) Act 2013).

Trusts have many applications and advantages, including the protection and preserving of assets, tax planning or just avoiding the expense and delays of obtaining probate under a will. They also provide a high degree of confidentiality. The BVI’s innovative, modern and user-friendly legislation, Virgin Islands Special Trust Act (VISTA) 2003 and Private Trust Company (PTC) legislation have enhanced its position as a jurisdiction for trust settlements and operations. VISTA allows a shareholder to establish a BVI trust over a BVI company, which disengages the trustee from administrative and managerial responsibility in relation to that BVI company. Considerable use is also made of the 2007 regulations to establish PTCs for holding and consolidating family wealth whilst retaining significant control over the trustees’ decisions by being directors of the PTC.

Since the introduction of the VISTA legislation, it has been said by leading practitioners that the British Virgin Islands has the most modern and coherent trust legislation globally. Policies and legislation have been developed in close partnership with the private sector, and as a result respond well to the needs of business and demonstrate a sophisticated and cutting edge approach.

Trusts in the British Virgin Islands are exempt from registration under the Registration and Records Act and trustees are exempt from any reporting and filing requirements, ensuring a high degree of confidentiality. Protection for trusts is ensured by the requirement that companies carrying on trust company business must obtain a licence and conform to various requirements under the Banks and Trust Companies Act 1990.

Global Premier expertise

Global Premier has a large specialist trust and private client team consisting of three directors, a senior associate, two associates and a trainee. Our specialist team has extensive experience of advising clients in relation to the establishment and structuring of trusts and foundations, estate planning, trust and estate litigation, international tax investigations and TIEA requests.

Further information on these alternative structures is available on request.

Patented inventions

Trademarks (and service marks), designs and models that are used or applied on products.

The above is a non-exhaustive list.

Take advantage of the Cyprus “IP Box” Tax Regime

In May 2012 the Cyprus Government has introduced growth measures which amongst others included a package of incentives and tax exemptions relating to income from intellectual property rights, aimed at stimulating investment in research and development. Therefore now Cyprus offers an efficient IP tax regime coupled with the protection afforded by EU Member States and by the signatories of all major IP treaties and protocols.

Intellectual property projects lend themselves to cross-border planning by reason of the mobility of intellectual property rights, which are intangible and can therefore be easily migrated between different jurisdictions and tax systems according to prevailing circumstances and developments in different jurisdictions.

The amendments to the Income Tax Laws are effective from 1 January 2012 and apply to all expenditure for the acquisition or development of intangible assets.

Registerable IP does not need to be registered in Cyprus to benefit from IP regime in Cyprus.

The Double Tax Treaties

Cyprus has over 50 Double Tax Treaties currently in effect and many more in the pipeline. This gives the ability to extract royalties from these jurisdictions at reduced or even zero withholding tax rates.

To directly access Cyprus Ministry of Finance to access List of Double Tax Treaties signed by Cyprus, click HERE

 –http://www.mof.gov.cy/mof/mof.nsf/page26_en/page26_en?OpenDocument

Cyprus IP Location Tax Benefits

The EU Directive and Regulations relating to IP protection have been fully transposed into Cyprus national legislation. As a result, with a single IP registration in Cyprus, IP rights which are owned by a Cypriot resident company may enjoy full protection in all EU Member States, as well as by the signatories of all major IP treaties and protocols.

The new provisions provide exemptions from tax of the income related to IP. More specifically:

80% of worldwide royalty income generated from IP owned by Cypriot resident companies (net of any direct expenses*) is exempt from income tax.

80% of profit generated from the disposal of IP owned by Cypriot resident companies (net of any direct expenses*) is exempt from income tax.

Any expenditure of a capital nature for the acquisition or development of IP is claimed as a tax deduction in the year in which it was incurred and the immediate four following years on a straight-line.

All the above exemptions are also available for IP acquired or developed before January 2012

Overall an effective tax rate of 12.5% one of the lowest in the EU is applied. The amount subject to tax under the new rules is calculated by deducting the writing down allowance, the costs (including interest) of financing the acquisition or development of the assets and any other direct expenses from the revenue earned, and dividing the resultant amount by five. Applying the Cyprus corporate income tax rate of 12.5% produces an effective tax rate of 2,5% of the net income.

This rate compares very favourably with the competition: the United Kingdom’s optional new “patent box” regime gives an effective rate of 10%on relevant income. The Irish scheme is more complex and it is not possible to directly compare rates, but it will generally produce a rate close to the UK rate. The Luxembourg and Netherlands schemes are somewhat better, with effective tax rates of 5.76%and 5% respectively, but they are both considerably less beneficial than Cyprus.

Following the introduction of the IP box, considerable savings can be achieved by locating the IP owner in Cyprus and having it license the use of the rights direct to the end users, eliminating (or at least reducing) foreign withholding taxes via a double tax agreement or the EU Interest and Royalties directive, which provides a uniform tax regime for royalties paid throughout Europe.

In addition to tax savings, the elimination of a corporate layer in a different jurisdiction will allow considerable savings to be made in administrative and compliance costs.

The new rules will also enhance the degree of legal and jurisdictional protection, given that the legal and corporate governance affairs of the IP structure will be governed by the laws of Cyprus, so ensuring an increased level of legal certainty, asset protection and predictability.

Cyprus’ wide double tax treaty network and access to the EU Interest and Royalty Directive serve as additional means for the group to achieve tax optimization when it comes to IP exploitation through Cyprus.

Example

Assume that a Cyprus IP company licenses its IP to its operating foreign Companies and in return it receives royalty income of €20.000 per year. The structure looks as follows: The expected annual tax for the Cyprus IP Company will be as follows:
Annual royalty income 100,000
Direct expenses (say) (20,000)
Net income 80,000
80% deemed deduction (64,000)
Taxable income 16,000
@12.5% income tax 2,000
Effective tax rate 2.5%

VAT

The acquisition of intellectual property rights from anywhere in the world by a Cyprus company is treated as a service rendered to the company which will create an obligation for it to register for VAT and to account for VAT on services received in accordance with the reverse charge rule. No registration obligation will be created if the intellectual property right is developed organically rather than being purchased.

If the company charges royalty fees to taxable persons within the European Union area it will also have to register for VIES.

Conclusion

The new regime provides very attractive opportunities for structuring the exploitation of IP assets through Cyprus and in particular through the use of Cyprus-resident IP owners, especially in the context of Cyprus’s extensive network of double tax treaties under which foreign withholding taxes on royalty income are either eliminated altogether or substantially reduced.

In most cases immediate economic and tax savings can be achieved by transferring intellectual rights currently held by entities located in low or no tax jurisdictions to Cyprus resident companies in order to take advantage of the new exemptions. The transfer of IP rights into a Cyprus company will not give rise to any form of taxation in Cyprus and the new benefits and substantial exemptions will become available as soon as the asset is transferred.

The EU Directives and Regulations relating to IP protection apply and have been introduced into Cyprus domestic legislation. With a single IP registration process in Cyprus IP rights owned by Cyprus companies may enjoy full protection in all EU Member States.

How Global Premier Can Help you

Set up Cyprus IP holding structure
Advise on Corporate Statutory Compliance matters
Advise on Existing IP – Transfer to Cyprus
Ongoing Support after initial set-up
Cyprus is signatory to the following international conventions relevant to IP
EC Regulation on the Community Trademark (CTMR)
Convention Establishing the World Intellectual Property Organization (WIPO)
The Madrid Agreement Concerning the International Registration of Marks (Madrid Agreement, MMA) and Protocol to the Madrid Agreement
The Patent Cooperation Treaty (PCT)
Berne Convention for the Protection of Literary and Artistic Works
Paris Convention for the Protection of Industrial Property
Geneva Convention for the Protection of Producers of Phonograms Against Unauthorized Duplication of their Phonograms
WIPO Performance and Phonograms Treaty (WPPT)
Rome Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organizations
Trademark Law Treaty
WIPO Beijing Treaty on Audio-visual Performances

Take advantage of the Cyprus “IP Box” Tax Regime

Cyprus offers the lowest tax regime on IP rights in Europe (maximum 2%) while protected by EU regulations on IP and by the fact of Cyprus being a member of all major international IP treaties and protocols.

To take advantage of the Cyprus low tax regime on IP you do not need to have the IP registered in Cyprus; it may be registered anywhere in the world but through a Cyprus company (i.e. the Cyprus company will be the registered holder of the IP).  IP includes the following intangibles:

Copyrights (such as films, sound recordings and musical works, broadcasts, publications, software programs, literary works, scientific works, etc.);
Tademarks and designs;
Patents.

Maximum 2% Tax on Profits generated from IP

Having any type of intellectual property registered through a Cyprus company will benefit you from enjoying an 80% tax exemption of your worldwide income from IP use (lease or sale).  In other words, the maximum effective tax rate on your income generated through the use of your IP through Cyprus will be as low as 2%, while at the same time benefiting from Cyprus’ wide double tax treaty network.

Why Global Premier?

What separates us from our competitors is that our services don’t end with the registration of your company. We offer a wide range of additional services others can’t or just won’t offer, such as lifetime free support.

Whilst most providers either specialise on personalized consultation at relatively high rates or run bulk registration factories without any support, we want to offer the positive aspects of both types.

Therefore Global Premier combines professional advice, worldwide registration services, reasonable fees, customized order processing, lifetime support and fast processing. Where others see company formation services as a bulk registration with no support and no individual assistance, we do care about your business needs.

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Our multi-lingual team of business advisors is happy to assist you with all upcoming questions and issues in relation to your company.

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You can also come and visit us at our Limassol offices to discuss issues face to face if you prefer. Just arrange an appointment and we will be happy to meet with you.

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