BEPS Project and Intangibles : Impact on IP Tax Structures

Intangible assets constitute a major value-driver for multi-national enterprises (MNEs). This is even more so for companies that rely on valuable intangibles rather than physical assets to generate financial returns. Intangibles such as patents, design, trademarks (or brands) and copyrights are generally easy to identify, value and transfer and as such attractive for multi-national tax planning structures especially as these rights usually does not have a fixed geographical basis and is highly mobile as a result can be relocated without significant costs.Many MNEs utilize IP structuring models whereby global or regional legal ownership, funding, maintenance and user rights of intellectual property are separated by design from actual activities and physical location of the intangible assets to operate in such a way that the income derived from intangibles in one location are received in another low (or lower) tax regime. As such IP ownership models have a significant effect on the taxation of MNEs