Mastering the Intellectual Property Life Cycle: A global perspective on the tax-efficient management of IP rights

"Intellectual property", Bill Gates once said, "has the shelf life of a banana". Now, you may argue with the sentiment, but you cannot deny the fact that intellectual property (IP) - its creation, its protection, its management - has become a major area of concern for companies worldwide. Which is why PwC is now issuing this new, updated version of Mastering the intellectual property life cycle.

This revised edition explains why it has become increasingly important for companies to know, manage and control their intellectual property. Organised in a way that systematically mirrors the actual life cycle of IP rights, Mastering the intellectual property life cycle offers compelling insights from both tax and legal points of view, as well as an accounting perspective. This new edition covers 45 countries around the world as compared to 31 countries covered by the 2005 edition. It provides individual country chapter overviews of the differences in territorial IP definitions, accounting treatments, and tax incentives.

In addition to its wealth of information and insights, Mastering the intellectual property life cycle can not only help you to elevate IP issues to the boardroom level (where they truly belong) but can also help you devise and deploy effective IP strategies that can boost the bottom line in fresh, innovative ways.

Meet the authors

Meet the authors: Isabel Verlinden

Isabel Verlinden

Partner and European transfer pricing leader

Isabel Verlinden is a Brussels-based international tax partner heading the European transfer pricing practice of PwC.

With first-hand knowledge of the transfer pricing challenges faced by companies operating across the globe, Isabel co-ordinates worldwide transfer pricing and/or intellectual property projects for some of the world's largest multinational groups.

Meet the authors: Axel Smits

Axel Smits

Partner, International tax services

Axel Smits is a tax partner with PwC in Belgium and heads up the Belgium international tax services team. He holds a law degree as well as additional qualifications in taxation, accountancy and finance. He is a chartered tax consultant under Belgian law (member of IAB/IEC) and a member of the International Fiscal Association (IFA).

Axel has more than 18 years of experience and frequently travels around the world for his clients where he regularly encounters issues regarding intellectual property rights (IP rights). He has developed particular expertise on IP rights throughout their life cycle and is recognised as an expert in the global PwC network.

He co-authored Substance: Aligning international tax planning with today's business realities. He further authored or contributed to various other publications which deal with the tax, legal or financial dimension of IP rights.

The IP life cycle

This book is constructed around the "life cycle" of intellectual property rights, seen from tax, accounting, and legal planning and defence perspectives. It focuses on developing, exploiting and alienating IP rights--covering areas, such as:

  • The definition, terminology and general aspects of intangibles.
  • Tax-efficient design of the ways in which intangibles can be developed and their values maintained.
  • How these rights are used including tax and transfer pricing structuring as well as planning opportunities.
  • How to address the migration of intellectual properties and reasons for it.
  • Valuation methods in general and in a transfer pricing context.
  • Overviews of country-specific legal, tax, transfer pricing, VAT and accounting issues in connection with intangibles in over 40 countries.

These aspects are illustrated with specific examples, relevant international case law and administrative practice. The authors also called on the experience of the global network of tax and legal professionals within PwC.

Managing IP from a tax perspective

Four building blocks for an IP tax strategy

Many companies make mistakes when trying to plan and manage their IP. The following key issues need to be addressed to build a robust IP tax strategy throughout the IP life cycle:

  1. A first and crucial step in any IP tax strategy is the identification of the various IP rights within a company or group. Often thought to be a simple exercise, practical experience shows that (legal or economic) ownership is usually scattered around the group and documentation is not readily available;
  2. Tax planning for IP rights is most effective when addressed early on in the IP life cycle; the value of IP rights can increase rapidly and make it more difficult to migrate them in a tax efficient manner;
  3. An IP tax strategy cannot exist on its own; it needs to be closely linked to the operational realities of the company or group and sufficient substance should be available; and
  4. This cannot be a one-off exercise; IP rights are volatile by nature and their value needs to be monitored throughout their life cycle as this will influence the effectiveness of the tax planning; in this respect, convergence from one kind of protection to another over time (e.g., a brand becoming more valuable than the initial patents) should thereby be taken into account.