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Strategies and Challenges in Fiscal Engineering and Intellectual Property Planning (IPPs)

This session delves into the intricacies of fiscal engineering and the taxation of intellectual property (IP) by addressing recent developments related to new corporate structures, tax regulations, and the growing focus on international trade in IPPs. The creation of a new parent company in the UK and concerns over tax avoidance through offshore IP subsidiaries will be discussed. With recent shifts in tax policies impacting dividend taxation based on real activity and income from IP, the need for better classification systems and measurement methodologies for IPPs is essential.

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Strategies and Challenges in Fiscal Engineering and Intellectual Property Planning (IPPs)

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Presentation Transcript

  1. Agenda item 6 Fiscal engineering and IPPs Discussant comments

  2. IPPs • Informa will create a new parent company listed in UK, incorporated in Jersey, and tax resident in Switzerland. • Under new tax rules, dividends from “real” activity will not be taxed. But income derived from intellectual property will be taxed • Companies that have a lot of intellectual property in their subsidiaries are being challenged – the revenues are in the Revenue’s view, largely artificial

  3. IPPs • Ocra company case study • Transfer patent to subsidiary in low tax country from which the patents are licensed to one or more licensing companies which do not levy a withholding tax on royalties paid abroad. • Spread between royalties paid and received can be minimised (no transfer pricing regulations)

  4. IPPs • Revenue is looking to clamp down on tax avoidance by multinationals that artificially offshore intellectual property assets to minimise tax liability • Selling back use of the intellectual property to domestic parent generates an offshore untaxed profit, and a generous tax deduction in the parent company country

  5. IPPs • Issue: international trade in IPPs has grown • SNA 2008 recognition of R&D as capital formation has led to increased need to measure IPPs • We need better classification system for IPPs, and in survey collection headings • We need information on affiliated company trade in IPPs and associated service payments

  6. IPPs • Background: classifications not up to speed, collection systems need to be developed. • International standards – OK • Measurement issues – huge • Tax avoidance schemes • R&D products not always patented • No one best current source of information (Frascatti?)

  7. IPPs • We need a new survey for international transactions in R&D products, especially between affiliates.

  8. IPPs • Summary • The form of the paper is a long way from what is needed to go in the manual • There needs more focus on fiscal engineering – if many (most) multinational minimise global tax burden by IPP switching schemes, there is no chance of the proposed survey getting useful answers

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