An overview of options for an IP Holding Company

The Cayman Islands is definitely one of the prime jurisdictions to hold IP and many of our clients and businesses generally hold their IP there.

Here is why it is attractive:

No corporate income tax, capital gains tax, or withholding tax, making it attractive for IP holding.
Strong legal framework based on English common law, offering robust IP protection.
Flexible corporate structures and no requirement for local directors or shareholders.
Well-regarded for international business, with a stable political and economic environment.

On the downside, Cayman is not the cheapest of the offshores with higher setup and maintenance costs compared to some other jurisdictions (see below).

One other factor is that Cayman requires compliance with economic substance rules for entities holding IP, meaning some local presence (e.g., office or staff) may be needed, which could add to the cost.

So in conclusion, we use Cayman mostly for projects with significant IP assets, such as patents or trademarks, used globally. For instance in the digital economy, gaming companies tend to use Cayman a lot.

Alternatives to Cayman

Here are some alternatives to Cayman:

British Virgin IslandsBritish Virgin Islands (BVI)

Equally, BVI has zero corporate tax and no withholding taxes on royalties or dividends.
Simple and cost-effective setup with minimal reporting requirements.
Strong confidentiality laws and no public disclosure of directors or shareholders.
Flexible company structures suitable for holding IP assets.

However, BVI has less developed IP-specific legislation compared to jurisdictions like the Cayman Islands or Singapore (see below).

Also, economic substance requirements apply, which may necessitate some local operations. We can help you with this and the additional cost will be less than in e.g. Cayman.

All in all, BVI is suitable for smaller businesses or those prioritizing privacy and low costs, but IP laws are less sophisticated. The same applies to Panama and some other offshores like Bahamas which is why we do not highlight them below.

Instead, we want to mention a “mid-shore” jurisdiction and also Ireland.

Singapore

Let’s start with Singapore:

Robust IP protection laws and a global leader in IP enforcement, with a well-developed legal system.
Attractive tax incentives, including the IP Development Incentive (IDI), which offers reduced tax rates on qualifying IP income.
Strategic location in Asia, ideal for businesses targeting Asian markets.
Extensive network of double taxation treaties (DTTs) to reduce withholding taxes on royalties.

Do take into account that Singapore will have higher operational costs than Caribbean jurisdictions and it requires compliance with strict substance rules (e.g., Singapore companies always need a local director, who we can provide).

In summary, Singapore is a good choice for businesses with significant IP-related activities or those seeking a reputable hub in Asia.

Ireland

Low corporate tax rate of 12.5% on trading income, with potential tax deductions for IP-related expenses.
Knowledge Development Box (KDB) offers a 6.25% tax rate on profits from qualifying IP assets (e.g., patents, software).
Extensive DTT network, reducing withholding taxes on royalty payments.
Strong IP laws and EU membership, facilitating enforcement across Europe.

On the downside, as can be seen form above, Ireland will be more complex and costly to maintain than Caribbean jurisdictions.

It also requires substantial economic presence to benefit from tax incentives. E.g. you need a EU-based director appointed, which Otonomos can provide.

All in all, we use Ireland for tech companies/projects with with strong or primary operations in Europe.

CONCLUSION

In the end our guidance would be to go for Cayman as you have specific IP protections laid down in its laws but do not have to be concerned with tax if properly setup. Even though the setup and maintenance may appear higher than some of the alternatives, in places like Singapore and Ireland there is tax to deal with and real substance required which if you add it all up will add tot he total annual bill for holding IP there.

All of the above options you can order online on otonomos.com