This tables shows information on intellectual property (IP) regimes reviewed by the OECD’s Forum on Harmful Tax Practices (FHTP).IP regimes allow income from the exploitation of IP to be taxed at a lower rate than the standard statutory tax rate.
IP regimes can be regimes that exclusively provide benefits to income from IP, but some preferential regimes categorised as IP regimes are “dual category” regimes. These regimes also provide benefits to income from other geographically mobile activities or provide benefits to a wide range of activities and do not necessarily exclude income from IP. The table shows information both on regimes that narrowly target IP income and on regimes that offer reduced rates to IP income and other types of income.
As agreed as part of the BEPS Action 5 minimum standard, peer reviews are undertaken to identify features of IP regimes that can facilitate base erosion and profit shifting (BEPS) and therefore have the potential to unfairly impact the tax base of other jurisdictions. The Action 5 Report placed a renewed focus on requiring substantial activity for any preferential regime, and the “nexus approach” is the substantial activity requirement developed for IP regimes. The nexus approach requires a link between the income benefiting from the IP regime and the extent to which the taxpayer has undertaken the underlying R&D that generated the IP asset. In addition to the nexus approach, features of regimes such as ring-fencing from the domestic economy and a lack of transparency are also considered in the peer reviews.
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