Taxing the invisible: IP, intangibles and the future of global planning

A report on a session at the 15th Annual London Finance and Capital Markets Conference held on 26 and 27 January 2026

Chair

Sandy Bhogal, Gibson Dunn, London

Panellists

Christian Wimpissinger, Binder Grösswang, Vienna

David H Saltzman, Ropes & Gray, Boston

Marco Adda, BonelliErede, Milan

Sonya Manzor, William Fry, Dublin

Ken Lioen, NautaDutilh, Brussels

Rachel Fox, Al Tamimi & Company, Abu Dhabi

Reporter

Karanjot Singh Khurana, DMD Advocates, Delhi

Overview

This session examined the evolving global landscape of taxation of different types of intellectual property (IP), a topic that continues to sit at the centre of international tax policy and corporate structuring. The discussion brought together experts to examine how IP is characterised for tax purposes, the source and allocation rules that govern income from intangibles and the continuing impact of the Organisation for Economic Co-operation and Development’s (OECD) Base Erosion and Profit Shifting (BEPS) measures, specifically the Pillar Two framework, on cross‑border IP arrangements.

The session also explored the increasing emphasis on aligning substance with value creation, particularly in the context of outsourced functions, alongside a detailed review of Pillar Two implications, including the treatment of research and development (R&D) tax credits and the challenges arising from accounting mismatches. The participants reflected on the emerging trends in IP structuring, key jurisdictional considerations and the future of global IP planning in a world moving rapidly towards greater transparency and harmonisation.

Introduction

The chair of the panel, Sandy Bhogal, opened the session by underscoring the growing importance of IP in today’s economy. He noted that private equity funds are increasingly directing investments towards IP‑driven sectors, such as healthcare, educational technology (edtech) and technology more generally. He further highlighted that the introduction of development, enhancement, maintenance, protection and exploitation (DEMPE) principles and the broader BEPS framework has brought significant dynamism to the taxation of IP.

Setting the agenda for the discussion, Bhogal invited Christian Wimpissinger to commence the proceedings with an overview of the corporate tax framework applicable to IP, with particular focus on the characterisation of IP and the source and allocation rules that govern its taxation.

Panel discussion

Framework for corporate taxation

Characterisation of IP

Wimpissinger commenced the technical segment by underscoring the imperative to distinguish between income arising from the outright transfer of IP as a capital asset (typically yielding capital gains) and income generated through the grant of rights to use IP, such as royalties or considerations embedded within broader service arrangements. He noted that this differentiation is foundational, as the allocation of source‑state taxing rights may shift substantially depending on the characterisation of the income. He further observed that the characterisation of IP‑related income has become increasingly intricate in modern commercial environments, owing to the layered nature of contractual rights, functional responsibilities and economic substance.

David H Saltzman reinforced these observations by noting that, in contemporary business models, IP is frequently delivered through service‑driven structures, rather than via traditional, standalone licensing or outright sale arrangements, thereby further complicating characterisation analyses.

Source/allocation rules

Turning to source and allocation principles, Wimpissinger explained that the tax nexus for IP‑related returns may be asserted in reference to several factors, including the place of use or exploitation of the IP, its place of registration and the residence of the income recipient.

Saltzman added that, because IP functions as negative rights and is inherently territorial, certain jurisdictions, such as the United States, tax IP based primarily on its place of use. He explained that this approach can give rise to complex extraterritorial consequences, particularly in cases where IP exploited in the US is transferred between two non‑resident entities.

Wimpissinger then addressed the allocation of profits from a transfer pricing perspective, emphasising the need to identify the location of personnel who perform and control DEMPE functions. He also observed that many jurisdictions tax IP income on a net‑of‑expenses basis, making the territorial sourcing of expenses and their attribution to the relevant IP critical for determining the tax liability in each jurisdiction.

He remarked that IP often represents the ‘crown jewels’ in major transactions, and that both the form and substance of how IP is structured, transferred or licensed within a transaction play a decisive role in determining the taxing rights and the overall fiscal outcome.

Case studies on exclusive/non-exclusive licensing

Referring to a number of case studies, Wimpissinger elaborated on the divergent tax consequences that may arise from exclusive versus non‑exclusive licensing arrangements. In the case of a non‑exclusive licence, the licensor typically retains substantial control over the exploitation of the IP and continues to bear the principal market and technology-related risks. In such circumstances, the associated consideration is often characterised as royalty income.

In contrast, an exclusive licence that transfers the predominant commercial benefits and core decision‑making authority may be viewed, in economic substance, as akin to a disposal of IP rights. This raises important questions regarding the appropriate capital versus income characterisation, potential exit tax implications and whether the purported licensee has, in substance, become the economic owner of the IP. Wimpissinger emphasised that, in such scenarios, the specific contractual terms, such as the presence of termination provisions and the nature and periodicity of payments, play a pivotal role in determining the correct tax treatment.

The impact of BEPS and Pillar Two

BEPS impact

Building on the OECD’s six‑step risk framework coordinated alongside the DEMPE principles, Marco Adda highlighted that the tax treaty definitions may not strictly apply for transfer pricing profit attribution. Referring to the OECD’s Transfer Pricing Guidelines, he emphasised that a party that contributes to control functions in relation to risk should receive commensurate participation in the upside/downside, not merely a routine cost‑plus return. This nuanced point is increasingly relevant where groups outsource R&D to captive providers that perform risk-related functions.

Case study: outsourcing DEMPE functions

The example presented by Adda illustrated how, in outsourcing arrangements, profit attribution must align with the actual performance and control of DEMPE functions, irrespective of where the legal ownership of the IP is held. He highlighted that the determination of arm’s length remuneration to an R&D centre may warrant examination of the degree of autonomy exercised and the relative ‘above-market’ activities performed by the centre. Similarly, a management committee overseeing and directing the development process may be entitled to a greater share of the IP‑related returns, even though it does not legally hold the IP. If the committee consists of employees from different entities, the relative contribution of the employee will be pivotal to profit determination.

The case study ultimately underscored the principle that economic ownership follows control, and that the allocation of IP profits must be guided by the location of the DEMPE functions, not merely by the jurisdiction of formal IP ownership.

Pillar II impact: R&D credits

Explaining the interface between Global Anti-Base Erosion (GloBE) and R&D tax credits, Sonya Manzor stated that the treatment of incentives under GloBE can shift effective tax rate (ETR) calculations. Qualified refundable or marketable transferable tax credits are treated as income for GloBE purposes, while non‑qualified credits reduce covered taxes and may depress the GloBE ETR to below 15 per cent. The new Substance‑based Tax Incentive (SBTI) in the Side-by-Side Package allows certain qualified incentives linked to real activity to be added back to covered taxes, mitigating ETR pressure while preserving genuine substance‑driven R&D models. Drawing from her experience with Irish laws, she elucidated that Ireland’s 2022 overhaul of the R&D tax credit introduced a more substance‑focused regime, aligning the credit with the OECD’s Pillar Two requirements and ensuring it functions as a fully payable, qualified refundable tax credit. The reform also removed caps on payable credits, enhancing Ireland’s competitiveness in attracting genuine R&D activity. She concluded by adding that Ireland’s Finance Act 2026 signals a clear policy focus towards substance‑driven R&D regimes, with certain enhancements, such as the increase in the R&D credit rate to 35 per cent and administrative simplifications that reward genuine onshore R&D activity.

Pillar II impact: accounting mismatches

Adda observed that divergences between International Financial Reporting Standards (IFRS) and local Generally Accepted Accounting Principles (GAAP) amortisation rules for intangibles can give rise to timing disparities that complicate the computation of GloBE outcomes. He highlighted the acute issues in relation to goodwill and other long‑lived or non‑amortisable intangibles due to the operation of the deferred tax liability (DTL) recapture rule, which recalculates the GloBE ETR by excluding DTLs that fail to reverse within five years. He emphasised the need for consistent reporting frameworks and robust reconciliation processes to track reversals and mitigate unexpected top‑up tax exposures.

IP structuring

Key considerations

Ken Lioen discussed IP structuring, which could be triggered in response to BEPS or other external factors. When migrating or re-organising IP, the groups involved need to examine if they intend to move IP in isolation or along with other critical assets.

Discussing the consequences of IP structuring, Lioen explained that restructuring hard‑to‑value intangibles can introduce significant challenges around the arm’s length valuation and may trigger hybrid mismatch issues, particularly where elements of the structure involve disregarded permanent establishments. Such re-organisation may also affect the eligibility for R&D credits or reliefs, depending on how the related functions and risks are realigned. A shift in the subsidiary’s role from an R&D owner to a contractor or service provider model can materially alter its entitlement to IP‑related returns. Additionally, the restructuring may have implications for the taxation of IP gains and embedded value, influencing both exit tax exposures and ongoing profit attribution.

Case studies

Through various case studies, Lioen illustrated that post‑BEPS IP migrations may face far stricter scrutiny. Transfer pricing now requires that the true economic substance behind the DEMPE of intangibles is accurately reflected. Jurisdictions increasingly examine restructurings where legal ownership shifts, but functional control and risk remain elsewhere, often leading to significant exit tax exposures or adjustments to account for any transferred synergies and future profit potential. The migration of IP today must therefore consider not merely the valuation, but also the alignment of people, decision‑making and financial capacity in the receiving jurisdiction.

The best jurisdictions for IP structuring – and why

Rachel Fox explained that corporations evaluate factors such as the availability of R&D credits, patent box regimes and the ease of proving entitlement to stipulated benefits for migrating IP. She meticulously compared key jurisdictions (the UK, US, Ireland, Luxembourg, the Netherlands, Switzerland, the United Arab Emirates and Italy) through the lenses of the headline rate, patent box regimes and R&D credits regimes to elucidate the taxation of IP incomes and R&D in these jurisdictions. Apart from these, she explained that factors such as deductions/amortisation of capital costs are also relevant for the determination of jurisdiction.

Apart from the corporate tax benefits, Fox also explained how individual income tax rates may impact the movement of IP. She highlighted that post-BEPS, the presence of a skilled workforce has become important for satisfying the DEMPE requirements. Countries such as the UAE, which have a low/nil income tax rate, have emerged as beneficiaries, as more senior executives, in control of the DEMPE functions of IP, are moving to these jurisdictions. Such countries are emerging as new IP jurisdictions.

The future of IP planning

Saltzman explained the future of IP planning using a US lens. He said that corporations are undertaking internal reconstruction of IP in response to the US One Big Beautiful Bill Act and the Pillar Two side-by-side system. Through case studies, he explained that two macro-trends have emerged owing to the recent changes in the US. First, there is a growing inclination for some groups to retain or repatriate IP to the US in light of certain overlapping domestic reforms and because the Pillar Two interactions have been tempered by local exit costs and the fact that many large US multinational enterprises will still hold or migrate IP abroad. Second, the approach calls for continuation or even migration of IP from US. While the tax costs of repatriation remain substantial, many groups have turned to ‘die on the vine’ strategies, which preserve the existing offshore value while allowing future development to occur in the US.

Conclusion

The panel discussion on the taxation of IP offered a comprehensive and forward‑looking examination of the rapidly evolving international tax landscape for IP. The panel underscored that post‑BEPS, the taxation of IP increasingly hinges on aligning the legal form with economic substance, particularly through the accurate identification and control of DEMPE functions. The discussion highlighted how characterisation, sourcing rules, transfer pricing frameworks and Pillar Two mechanics continue to reshape cross‑border IP structures, while developments to R&D credits and accounting standards add further layers of complexity. Through the use of case studies and comparative jurisdictional analyses, the speakers emphasised that modern IP planning requires the navigation of heightened scrutiny, substance‑based regimes and shifting global norms. The session concluded with shared recognition that successful IP strategies will depend on flexible structuring, robust governance and thoughtful anticipation of future policy directions in a world steadily moving towards greater transparency and harmoniation.