The Tax Treaty Implications of the Remuneration as Royalties of Intellectual Property and Intangibles

Abstract

Transferring intellectual property from a higher-tax country where R&D takes place to a lower-tax country is one channel facilitating BEPS and this generates a flow of the remuneration of intangibles from high-tax countries to low-tax countries. These remunerations are defined as “royalties”, but they can assume different legal forms and denomination. These cross-border flows of royalties are regulated by a host of bilateral tax treaties between OECD and non-OECD countries amounting in total to more than three thousands. These treaties generally follow the OECD Model, but also a UN Model exist, while certain countries such as the U.S., adopt their own model (which does not differ dramatically from the OECD Model). In this Article the provisions of the OECD Model will be used as a proxy for the provisions of the numerous existing treaties.