Zoomcopter Ltd., a company established in Taiwan, has developed a new widget
which is used as a spare part in the assembly of helicopters. By using this
widget when producing the helicopters, the operational costs of the helicopters
can be substantially reduced.
Zoomcopter holds the worldwide patents on this invention and it wonders how
the exploitation of the patents can be arranged in a tax-effective manner.
The patent should be transferred to a company in a low tax country from which
the patents are licensed to one or more licensing companies in countries with a
dense tax treaty network and which does not levy a withholding tax on royalties
The set-up of a licensing company in Mauritius could meet these objectives.
Mauritius has an expanding network of double taxation treaties, thus
substantially reducing the withholding taxes on royalties paid to the Mauritius
Although the Mauritius company is subject to tax in Mauritius at a rate of
15%, the spread between royalties received and royalties paid to the offshore
patent-holder can be minimised (Mauritius has not adopted any transfer pricing
regulations which could have an impact on the amount of the spread).
Royalties paid by the Mauritius company are not subject to a withholding tax
Note: If there is no double tax treaty between Mauritius and the
country from which the royalties are paid, the set-up of a sub-licensing company
in a third country might be considered, e.g. Luxembourg. Luxembourg has a good
tax treaty with Mauritius.
A bespoke 'offshore' solution can be complex and requires careful planning and execution. We therefore encourage our clients to contact us directly, without obligation.
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