Transferring a company's intellectual property (IP) or other intangible assets to a low-tax country to optimize tax expenditures is often referred to as “tax planning” or “IP migration strategy.” However, such operations must strictly comply with national tax laws and international tax rules (such as the OECD's BEPS framework) to avoid being regarded as aggressive tax avoidance. Here are some common strategies and their key points： --- ### **1. Establishment of an Intellectual Property Holding Company (IP Holding Company)** -**Operation method**: Set up a subsidiary that specializes in holding IP in low-tax countries (such as Ireland, Singapore, Luxembourg, Switzerland, etc.), transfer IP ownership to that entity, and collect revenue into low-tax areas through royalties or authorization agreements. -**Key points**： -*****: Choose a country with a low tax rate and extensive tax treaties (such as the Netherlands' “Entente Advantage”). -**Transfer pricing**: It must comply with the "Arm's Length Principle” to ensure that the IP transfer price is reasonable (an independent evaluation report may be required). -**Economic substance requirements**: Many countries (such as EU member states) require holding companies to have actual business activities (such as personnel and office space) in the local area, otherwise they may be denied tax incentives. --- ### **2. Cost Contribution Arrangements (CCAs)** -**Operation method**: The cost of IP R&D is shared within the multinational enterprise group, and the future income is distributed proportionally to affiliated companies in low-tax areas. -**Applicable scenarios**: Applicable to joint R&D projects, such as pharmaceutical and technology industries. -**Risk point**: It is necessary to ensure that the cost-sharing ratio matches future earnings to avoid being questioned by the tax authorities about the transfer of profits. --- ### **3. Royalties (Royalty Payments)** -**Mode of operation**: Subsidiaries in high-tax areas pay royalties to IP holding companies in low-tax areas to reduce taxable profits in high-tax areas. -**Note**: Withholding Tax (Withholding Tax) needs to be avoided in conjunction with tax treaties. For example, reduce the withholding tax rate through a “conduit company” in the Netherlands or Switzerland. --- ### **4. Use the “IP Box” or Patent Box Regimes (Patent Box Regimes)** -**Policy background**: Some countries (such as Ireland, the United Kingdom, and Belgium) provide preferential tax rates (such as 6.25%~10%) on IP-related income. -**Operation method**: Transfer the IP to the country where the IP Box is provided, and eligible income (such as patent authorization income) can enjoy a low tax rate. -**Compliance requirements**: The “Nexus Approach” must be met, that is, the preferential tax rate is only applicable to IPS that are actually involved in R&D activities. --- ### **5. Move headquarters or holding company** -**Operation method**: Transfer IP ownership to the parent company or regional headquarters in a low-tax country through company reorganization. -**Case **: U.S. companies have moved their headquarters to low-tax countries (such as Ireland) through “Inversion”. -**Restrictions**: Many countries have introduced anti-tax inversion rules (such as Section 7874 of the U.S. Tax Code). --- ### **6. Hybrid entities or Hybrid Instruments (Hybrid Instruments)** -**Operation method**: Take advantage of the differences in tax treatment of the same entity or financial instrument (such as debt and equity) in different countries to reduce the overall tax burden. -**Risk**: The second action Plan of BEPS has restricted the abuse of mixed mismatches. --- ### **7. Debt Financing Arrangements (Debt Financing)** -**Operation method**: IP holding companies in low-tax areas provide loans to operating companies in high-tax areas, and interest payments can be deducted from profits in high-tax areas. -**Note**: It is necessary to comply with the “Thin Capitalization Rules” to avoid the rejection of excess interest deductions. --- ### **8. Phased transfer of IP ownership** -**Operation method**: Gradually transfer IP from high-tax areas to low-tax areas, for example, first use it through licensing, and then gradually transfer ownership. -**Advantage**: Reduce the tax risks of one-time transfers (such as capital gains tax). --- ###**Key risks and compliance requirements** 1. **Anti-tax avoidance rules**： -**BEPS Action Plan**: Countries may combat profit transfer in IP transfer in accordance with BEPS Actions 5-10. -**Controlled foreign company (CFC) rules**: If a subsidiary in a low-tax area is recognized as a CFC, its income may be subject to tax in the country where the parent company is located. -**Economic Substance Law**: For example, the EU "List of Uncooperative Tax Jurisdictions" requires entities to have actual economic activities. 2. **Transfer pricing disputes**: The tax authority may challenge the IP valuation or the proportion of royalties, resulting in fines or double taxation. 3. **The world's lowest tax**: After the implementation of the OECD's “Global Anti-base Erosion (GloBE)” rule, multinational companies are required to pay an effective tax rate of at least 15%, which may weaken the advantages of the traditional low-tax structure. --- ###**Implementation step suggestions** 1. **Evaluate the value of existing IP**: Determine the market value of IP through independent evaluation. 2. **Choose the appropriate jurisdiction**: Comprehensive consideration