European Business Law Review

Volume 29 (2018)

Volume 29 (2018) / Issue 3

Carlo Garbarino, 'The Tax Treaty Implications of the Remuneration as Royalties of Intellectual Property and Intangibles' (2018) 29 European Business Law Review, Issue 3, pp. 345–368


The transfer of intellectual property from a higher-tax country where R&D takes place to a lower-tax country facilitates the phenomenon denominated “base erosion and profit shifting” (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 crossborder flows of royalties are regulated by a host of bilateral tax treaties between OECD and non-OECD. 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 are used as a proxy for the provisions of the numerous existing treaties. The paper analyzes payments that are not royalties, but business profits in so far they are generated in business-to-business transaction, as well the characterization of payments for know-how in different areas. Attention is also devoted to payments for computer software, by looking at the software-related payments that are royalties because they imply the use of the intangibles, but also at the software-related payments that are business profits because of the underlying contractual configuration. Finally the paper focuses on payments for mixed contracts which may have an hybrid legal and tax characterization.

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ISSN: 0959-6941
ID: EULR2018013