Tax Planning for “Inbound” Licensing of Intellectual Property

Use of Low-Tax Permanent
Establishments
• While the Proposed Regulations are clearly designed to
shut down conduit financing arrangements involving
hybrid entities (i.e., entities that are fiscally transparent
for U.S. tax purposes but are not fiscally transparent for
foreign tax purposes), the Proposed Regulations do not
prevent taxpayers from obtaining treaty benefits when a
non-hybrid branch is used.
• This is because the Proposed Regulations specifically
indicate that only entities that are disregarded under the
check-the-box Regulations are treated as persons for
purposes of determining whether a conduit financing
arrangement exists.
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