Tax Planning for âInboundâ Licensing of Intellectual Property

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U.S. Inbound Intellectual Property Transactions – Key Characterization Issues • Sale vs. license ? • If sale – portion of payments considered “contingent on the productivity, use or disposition” of property ? • If license – “place of use” of IP ? • Permanent establishment ? 4
Treaty Issues and Opportunities • As noted earlier, U.S.-source royalties are generally subject to 30 percent withholding tax. • Most modern U.S. income tax treaties substantially reduce or eliminate the U.S. withholding tax on royalties. • To qualify for treaty benefits, foreign person needs to be (i) resident of treaty jurisdiction, (ii) needs to satisfy limitation on benefits (LOB) provision, if any, contained in treaty, and (iii) needs to qualify for treaty benefits under Section 894, if applicable. 5
Page 1 and 2: Tax Planning for “Inbound” Lice
Page 3: Key Aspects of U.S. Federal Tax Sch
Page 7 and 8: Section 894 and Payments to Hybrid
Page 9 and 10: Treaties without LOB Provisions tha
Page 11 and 12: Conduit Financing Issues • If can
Page 13 and 14: Conduit Financing Issues (cont.)
Page 15 and 16: Conduit Financing (cont). - Example
Page 17 and 18: Conduit Financing Issues (cont.)
Page 19 and 20: Use of Low-Tax Permanent Establishm
Page 21: Hybrid Instruments (cont.) Cayman C

Tax Planning for âInboundâ Licensing of Intellectual Property

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Tax Planning for âInboundâ Licensing of Intellectual Property