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CREATING, VALUING AND FINANCING TAX EFFICIENT INTELLECTUAL PROPERTY STRUCTURES

Updated: 13 Feb 2017

The following summary of the Malta Discussion Group meeting highlights the impact of intellectual property on the value of companies and the tax efficient structures that can maximise its exploitation.

Dr Paul Micallef Grimaud started the session introducing proposals in making Malta an IP hub.  The proposals, which was the product of a multi-disciplinary working group, were due to be submitted to government within the month.   The issues raised covers various aspects across the spectrum of Intellectual property including registration.  

One proposal centred on an online register and exploring possibilities for registration of new forms of intellectual property registrations.   Other proposals covered IP as security and raising of capital, the possibility of an online trading platform for IP assets and having the possibility of fractional ownership for IP; creating specialised courts and ADR, and ensuring a fair balance between fair taxation and attracting investors. An interesting debate ensured on the difference between IP in the US and the EU, where in the US it is possible to enable the trademarking of business processes whereas this does not seem to be possible in the EU with an interesting intervention from the floor. 

Kelvin King discussed how Intellectual Property (patents, trademarks, copyright and design right) and intangible assets (brands, know-how, confidential information etc) (all ‘IP’) are capable of separate identification and valuation. As one of the most important advances in wealth creation this fact magnifies risk and liability assessment. In most acquisitions, IP is likely to account for a large proportion of consideration. Every business has intellectual property rights, even if they are only in the name under which it trades. Just as importantly, every business uses other people’s intellectual property.   There are many situations that demand opinion from expert IP valuers for tax planning, forensic and related work in reporting these assets in accounting. You may be considering lending and credit risk, a sale or purchase of a company or asset, assessing damages following infringement or for a variety of other reasons. These assets can be transferred to intra-group and to other jurisdictions. Valuation for tax and or transfer pricing purposes will often be required. Licensing and advice about royalty rates is a key requirement in exploitation strategy and transfer pricing.   Mr King covered current big IP valuation issues, occasions for valuation, valuation concepts and methods of valuation. 

Julie Meyers then spoke how digital economy has reached stratospheric heights of growth and how it is possible to have digital enablers to transform the operating model of traditional large businesses.  She spoke on an innovative platform that her firm Ariadne Capital is launching called Eco-system Economics Investor Network, which aims to generate 1Billion Euros to back European enablers and is Europe’s first venture capital platform targeted at tech investors.

A few other points discussed were a) consumer data - there are issues regarding privacy and data protection; plus the EU proposal on text and data mining in research scenarios when done in collaboration with an educational institution and b) business processes - this is not allowed in Europe by the European Patent Convention, but is allowed in the US. There is a push for having “utility patents” in Europe but this is not the same as allowing business processes to be patented. Work arounds are tried, but mostly in the area of computer programs (which per se are not allowed to be the subject of a patent in Europe). 

The event was wrapped up by Geraldine Schembri who looked at how patent box regimes have been impacted post –Beps and how Malta’s tax system was useful in structuring for intellectual property even if patent box regimes were not used.