Page 45 - Strategic Tax Planning for Global Commerce & Investment

Strategic Tax Planning for Global Commerce and Investment

The transfer of IP from one legal entity to another will
generally be a taxable transaction and, where the IP is
internally generated there is often no tax-deductible basis.

Option 1

The most commonly used approach to transfer IP intragroup is
to “freeze” the existing IP, by granting a license over to a new
IP company in return for a periodic royalty, while ensuring that
the new IP, and any additions to the existing IP take place at
the level of the new IP company.

Option 2

In some circumstances a tax-efficient cross-border transfer of IP
could be effectuated. For example, in some countries there are
domestic law rules allowing, under certain circumstances, a
tax-neutral contribution to a foreign company, in exchange for
the issuance of shares in the receiving company. If the receiving
company is located in a suitable jurisdiction, in some cases, no
further transfer of the IP may be necessary. Alternatively, if the
receiving company takes the IP into account at fair market
value for tax purposes, any subsequent transfer from the
receiving company to a third company should trigger little tax
exposure.

Option 3

Another complex possibility would involve several steps. First,
it would involve the transfer of the IP to a foreign permanent
establishment, which in many jurisdictions will be neutral from
a tax perspective and, subsequently transfer the permanent
establishment to a newly created IP company.

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