IN145 - Advantages in the Holding of Intellectual Property Through Guernsey

Guernsey Intellectual Property Laws were updated and made far more attractive under legislation introduced in 2005. As far back as 2002 the Guernsey government had reached the decision that the correct legislative environment was essential to attract Intellectual Property (IP) intensive companies to the island.

Legislation

There are two aspects to IP legislation in Guernsey:

• Enabling, or primary legislation which came into force in April 2005. This established the basis for the subsequent introduction of specific laws relating to various different categories of IP rights.


• Secondary legislation allows for the drafting of specific rights through ordinances.

The main advantage in structuring the legislation in this way is its flexibility, which allows Guernsey to react quickly and introduce new ordinances as and when appropriate.

Intellectual Property Office

A pro-active IP office in Guernsey has been established. This has been created specifically for the purpose of providing a system of registration for trademarks and re-registration of intellectual property instruments, particularly patents granted by reputable national and/or supra-national offices.

TRIPS Certification

Guernsey is one of only a few traditional offshore jurisdictions that is fully TRIPS compliant (Trade Related Aspects of Intellectual Property Rights). Guernsey is also seeking recognition from the World Intellectual Property Organisation and is applying for membership of the various international conventions, treaties and protocols, including Berne and Madrid.

Tax Planning Opportunities

The general concept of a tax efficient intellectual property structuring scheme often involves the transfer of existing intellectual property rights to a holding company located in a jurisdiction that offers an attractive tax regime for the exploitation of these rights. Guernsey offers the following tax planning opportunities:

• The opportunity to accumulate royalties in a tax efficient environment.


• No capital gains or inheritance taxes.


• Non-Guernsey source income is exempt from Guernsey corporation tax (from 2008 in fact all corporation tax in Guernsey will be reduced to zero, with the exception of deposit taking banks).


• No withholding tax on payments to shareholders.


• Guernsey is a leading jurisdiction for the use of Protected Cell Companies (PCCs). Under PCC legislation the assets of one cell are not available to the creditors of another cell. This may be of particular relevance to certain classes of intellectual property, such as IP based investment funds and technology exploitation vehicles.

Use of a Subsidiary Company Within the Structure

It may not always be attractive to have direct IP licensing from a Guernsey company due to potential withholding taxes. This is because currently Guernsey does not have an extensive network of tax treaties.

It could therefore be appropriate to include a subsidiary or conduit company within the structure. Switzerland is an attractive option as taxes on out-going revenue are generally zero-rated, and in-bound revenue may be mitigated with respect to withholding taxes by double taxation treaties with other countries.

Summary

Following various changes to the law, which began in 2005, Guernsey is now a very attractive jurisdiction for the organisation of intellectual property. Benefits include flexible legislation, TRIPS compliance, a pro-active dedicated IP office and, as a result, potentially effective tax planning opportunities.

Additional Information

If you require any additional information about the organisation of Intellectual Property through Guernsey, please contact John Nelson at the Dixcart office in Guernsey or speak to your usual Dixcart contact.