Intellectual Property Holding Companies: Tax Panacea or IP Mistake?

Excerpt from Practical US/Domestic Tax Strategies by Paul Dau, Paul Devinsky and Justin Hill (McDermott Will & Emery LLP)

Typical reasons for establishing intellectual property (IP) holding companies include (i) tax planning, (ii) protection in the event of insolvency, and (iii) administrative synergies, such as consolidation of legal costs. In reality the process of establishing and operating an IP holding company is far from trivial. By its very nature it brings together three complex legal fields, namely intellectual property, tax and insolvency. Moreover, the considerations that apply are usually multi-jurisdictional and therefore inherently complex. Oftentimes, IP holding strategies turn out to be optimized with one or more of the above legal fields more in mind than the others. Failure to assess properly competing economic and legal considerations in these complex international scenarios can lead to failure to meet objectives and runaway costs.

In many cases, the holding company is a subsidiary within an international corporate group. Sometimes, although less often, the holding company is the parent company of the overall corporate group. Adoption of a suitable structure depends to a large extent on the headquarter jurisdiction, the mechanism by which the various synergies are anticipated to operate, and on the circumstances of the particular scenario.

More>

Transfer Pricing and Customs Valuation

Excerpt from Practical US/International Tax Strategies by Peter E. Kirby (Fasken Martineau DuMoulin LLP)

While the income tax authorities in Canada and the U.S. have spent the last twenty years developing, refining, and explaining their policies for testing transfer pricing decisions, the customs authorities in these countries have been slower to come to grips with the issue. That has now changed and the customs authorities in Canada and the U.S. have begun to look more carefully at transfer pricing. As a result of that scrutiny, two things have become clear. First, a transfer price that may be acceptable to the income tax authorities may not be acceptable to the customs authorities. Second, a transfer price study that confirms the acceptability of transfer prices for income tax purposes is, in most cases, irrelevant for the purposes of customs valuation.

More>

Spain’s Draft Regulations on Transfer Pricing Rules

excerpt from Practical European Tax Strategies written by Pedro Aguarón (Baker & McKenzie Barcelona, S.L.)

As a result of the new Law for Avoidance of Tax Fraud (LATF) enforceable in 2007, the Spanish transfer pricing legal framework has changed significantly.

One notable change is that the LATF introduced specific transfer pricing requirements. The taxpayer is required to properly document that the price used in related transactions is arm’s length and make this documentation available at the tax authorities’ request.

Read More (free)