Taxation of Cross-Border Royalty Payments

Viktoriia Y. Fomenko

The increasing importance of intellectual property rights and the licensing of technology in modern business raise potential cross-border tax questions as well as tax planning opportunities for multinational groups. For example, multinational groups involved in technological, scientific and pharmaceutical businesses may seek to generate licensing income from such rights in low-tax jurisdictions to minimize tax burden.

Properly characterizing licensing income in cross-border transactions is necessary for determining the appropriate taxation of such licensing income. In general royalty income is treated differently from income derived from sales, so thorough analysis is needed to determine whether or not each particular payment is classified as a royalty...