9 Meeting of AEG Economic Ownership of Intellectual Property Products by SPEs

advertisement

9 th Meeting of AEG

Economic Ownership of Intellectual

Property Products by SPEs

Michael Connolly

Chair UNECE Task Force Global Production

September 2014

Presentation Outline

• Review of TF Head Offices Holding

Companies and SPEs

• Illustrative example

• Work of TF Global Production on

Economic Ownership of IPP

• Recommendations

Royalty and Licencing Companies –

TF Head Offices, Holding Companies and SPEs

• SPEs - Group receipts of royalties and licences

• Recognised as an institutional unit (SNA 4.61)

• Do these SPEs own the related IPP ?

• To reroute the receipts to the original owner - parent or originator of the IPP – difficulties caused by imputations

TF Global Production get involved

“further clarification is needed on the

(economic) ownership…of certain assets of SPEs

…TFGP to put forward more concrete proposals”

8 th AEG Meeting, June 2013 Luxembourg

Consequences of recognising SPE as economic owner

• Capital formation increases in SPE country

• Trademarks, brands etc. are recognised as being owned by SPE

• Profits earned in one jurisdiction reduced by IP charges - effectively a rerouting of profits

MNE Rationale for Non-Resident SPE holding IPP

• SPE created for Tax planning purposes

• Double tax agreements

• Withholding tax agreements

MNE Structure (simplified)

US Parent

Cayman Irish registered non-resident- owner of IP

ROYALTIES

Dutch

Company – IP

Sub licences

Irish Resident

Trading Company

Ireland imports Royalties

Royalty Flows

CAYMAN

ISLANDS

NETHERLAND S

IRELAND

Assessment of Royalty Flows

• Netherlands is little more than a conduit for these royalty flows

• Cayman is a passive holder of IPP

• Actual beneficiary is parent in US

• This issue not examined in depth by TFGP

TF Global Production

Economic Ownership of IPP in MNE Groups

• Risks and Rewards of IPP

– Risks – registrations, enforcing copyrights etc.

– Rewards – Royalty and other fee receipts

• Difficult to observe transactions in IPP itself

• Compilers reliant on accounting data

Decision Tree for IPP ECONOMIC Ownership

Is unit member of a MNE group ?

Did the Unit produce the IPP ?

Main activity of the Unit ?

Does the Unit receive income from IPP or pay for the use of IPP ?

Economic Ownership of IPP in MNE Groups

• Following the decision tree should lead to decision on ownership

• Information may be scarce

• Importance of who prepares accounting records for SPE

Economic Ownership of IPP in MNE Groups

• Importance of Large Cases Units (LCU)

• Understand the MNE structure

• Cost recovery and transfer price agreements within MNE

• Legal rather than economic ownership

Economic Ownership of IPP in MNE Groups

TFGP Recommendations

• IPP producers are owners of IPP

– Unless sale of original to parent or subsidiary

– Unless no IPP related turnover generated - control by parent

– Without conclusive evidence assign ownership to IP producer

• Rerouting of ownership away from SPE /Royalty companies not recommended

• Assign economic ownership to these units

• A separate institutional unit is recognised and consequently de facto owner of IP assets

• Record these transactions separately

Economic Ownership of IPP in MNE Groups

TFGP Recommendations

• AEG is requested to review the decision tree and the discussion points in Section 3 of the issue paper

• The AEG is requested to express their views on the recommendations of the

TFGP as formulated in section 4

Download