Who is Owner: Tax/Transfer PricingThe process of determining the owner of an intangible can become difficult when one entity is the legal owner and another is the economic owner. The legal owner refers to the entity that is considered the owner under IP law, while the economic owner refers to the entity that has the right to the income attributable to the ownership of the asset, such as royalties. Another way to determine ownership is looking at the degree of centralization. Centralized ownership can have the following attributes: a single company in the group that owns the intangibles legally and economically and has license agreements with other group entities, a situation which can create opportunities for tax planning. A distributed or joined ownership, on the other hand, has the following attributes: a number of group companies that share ownership of intangibles on a pre-determined basis, always involves some form of shared economic ownership, usually takes the form of an R&D cost contribution or cost-sharing R&D arrangement. In addition, the OECD guideline offer two standards about the ownership of intangibles: Legal ownership is defined according to the legal title and legal protection of the intellectual property. Thus, the intellectual property can be legally protected in the country it is registered, such as patents and trademark. From a transfer pricing perspective, the legal owner of the intellectual property is considered as the owner of the IP. For patent and trademark, the owner can protect their intellectual property by registering them; however, for embedded intangibles like know- how, it is usually hard to use legal system to protect it. Legal ownership offers the owner the protections and the rights to utilize the IP to generate further benefits. Economic ownership refers to a situation when the intangible is not legally protected or it is difficult to identify the legal owner of the intangible so economic ownership is then considered. Economic ownership can be determined by analyzing the relative contributions to the intangibles by each party. Though legal ownership is usually the starting point of defining ownership, there are cases where ownership lies elsewhere, such as with the licensee. The following circumstances describe instances when the ownership does not lie with the legal owner but with the economic owner.
   |
        |