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Offshoring us ip
- 1. Brexit - What’sNext? A Quick Case Study: Migrating IP from the US to the UK Presented by Robert J. Kiggins June 5, 2017
- 2. Brexit - What’sNext? QUICK DISCLAIMER Not to be Taken as Legal or Tax Advice For Educational Purposes Only
- 3. Brexit - What’sNext? CASE STUDY ASSUMED FACTS • US Corp Bio Tech Start Up (“US Bio Co”) • Some non US Shareholders but US Controlled • Pending License Deals • Major University • Development Company • No revenue expected until late 2018 • US Top Corporate Rates – 35% • UK Top Company Rates – 17%
- 4. Brexit - What’sNext? QUESTION SHOULD BIO CO MIGRATE ITS IP TO THE UK TO BE HELD BY A RELATED UK COMPANY (UK BIO CO) AND IF SO WHEN?
- 5. Brexit - What’sNext? MAJOR US TAX FACTORS TO CONSIDER Outbound Transfer Rules and Regs - Will tax transfers of IP by valuing future income stream from IP and taxing US Bio Co on a deemed annual royalty payment from UK Bio Co Transfer Pricing Rules – Highly complex and require a transfer pricing expert study – E.G. $50,000 USD cost Inversions – If UK Bio Co as parent has 80% common ownership w/ historic US Bio Co and receives substantially all of the US Bio Co Property (e.g 90% or more) then UK Bio Co and US Bio Co are treated as one and all subject to US tax Controlled Foreign Corporation Rules – 50% + US shareholders will give generally give CFC status which will mean the US shareholders will be taxed on the passive income of UK Bio Co regardless of whether it is actually distributed or not. US Tax Reform – US Tax Rates could come down to 15% with even better rates for IP
- 6. Brexit - What’sNext? What to Do?? Have licenses go directly to UK Bio Co from the start – Avoid expensive transfer pricing issues avoid inversion issues Don’t wait for US Tax Reform which may or may not come. Keep operations in the US Bio Co – Build up Net Operating Losses here in US in the days before the venture becomes profitable Worry about CFC issues later when operations are ready to turn profitable.
- 7. Brexit - What’sNext? What about the UK • Do not take advice from US counsel on UK Law or vice versa. • Get UK counsel on UK tax rates • Get UK counsel on the UK patent box • Get UK counsel on if it would be burdensome to transfer IP back out of UK to the US if US Tax Reform comes about
- 8. Brexit - What’sNext? Why I like the UK • Common language and common legal system • Freedom (Post Brexit) to set their own tax laws without interference from the EU • Favorable Tax Rates
- 9. Brexit - What’sNext? THANK YOU!! Questions? Ask today, or call: (914) 310-6284 or email me: rkiggins@culhanemeadows.com ROBERT J. KIGGINS, ESQ.