US multinationals have for years sought and implemented various planning techniques to lower their overall corporate effective tax rate. Taxand USA discusses this further.
For technology and life sciences companies, migration of intangible property (IP) to low-tax jurisdictions has become standard fare. Most IP migrations involve either some form of IP transfer (involving either a lump sum buy-in payment or annual deemed royalty payment commensurate with the income derived from the use of the IP) or license of IP.
However, not all IP migrations are created equal, and in recent years the use of a partnership as a vehicle to migrate IP offshore has gained popularity as an alternative to these traditional methods.
The benefits of implementing an IP partnership as a preferred alternative to the more traditional IP transfer or IP licensing transaction have largely evaporated. While taxpayers should continue to perform appropriate diligence and feasibility modeling to determine the best form of IP migration for their business, the use of IP partnerships has become more challenging and may not provide optimal results.