A new Australian R&D tax credit has replaced the old R&D concession for tax years on 1 July 2011 (although the relevant bills were not passed until late August). The new regime provides a 45% repayable credit on unlimited R&D expenditure for groups with turnover of less than Aus$20m, and a 40% non-repayable credit for groups above that threshold. SMEs will be able to get quarterly repayments from 2014, to improve cash-flow and encourage reinvestment in R&D.
These credits are an increase on the old regime, paid for by a restriction on the types of R&D that will qualify – the definition has been tightened up, focussing on experimentation.
Liechtenstein introduced a tax reform at the beginning of this year which included changes to their taxation of intellectual property, giving a local effective tax rate of 2.5%. Those changes have now been ratified by EFTA’s Surveillance Authority.
The state of Louisiana gives a 35% state payroll tax credit on all Louisiana labor directly involved in the development of video games (and so doesn’t include administration or executive work) and a 25% tax credit on all the direct support costs such as premises leases, computers and training. The state estimates these reliefs reduce the cost of doing business in the games industry in the state by around 30% overall.
The OECD Working Party looking at the transfer pricing of intangibles, including intellectual property, met in late March in Paris. The OECD has now published details, including the supporting presentations of that meeting.
Taxand have published an article – Payments For Leasing Bandwidth: Business Profit Or Royalties? – following a recent case in Indonesia. The case involved a payment from Indonesia to a UK company (Intelstat) for the use of satellite bandwidth, and quotes similar cases in India and Australia. The court found for the taxpayer, that the lease payments were business profits and not a payment of royalties.
The point at issue was the interpretation of the phrase “the use of, or the right to use, industrial, commercial or scientific equipment” in the UK/Indonesian tax treaty. This phrase appears in the royalties article of a number of older UK tax treaties and seems at odds with the more usually encountered definition of royalties in this context as relating to the direct use of intellectual property, rather than to the use of the product of intellectual property (the equipment).
ATO triumphs over IBM in $55m tax war – ZDnet – IBM were trying to extend the scope of a “private ruling”, which seems to be an advance pricing agreement of some sort on the transfer pricing of royalties. The agreement was reached for 2004 and IBM considered that it should continue to apply after 2004, and also tried to get a refund for tax paid from 1987-2002 on that basis that the agreement should have retrospective effect.
The Australian Tax Office disagreed, and the court has upheld the additional tax bill for 2005 onwards.
Wanted: A Tax Code for the Digital Age – BusinessWeek – discusses how Amazon reduces its tax bill, compared to similar bricks-and-mortar companies in the US, and refers to transfers of IP offshore, probably to a Luxembourg entity and how transfer pricing assisted a reduction of 6 percentage points in Amazon’s effective tax rate.
From the Moscow Times – newspaper article which gives a general overview rather than detail, but it’s clear Russia have just as much trouble as the rest of the world in working out how to tax IP: “tax consequences of transactions involving goods, works and services leaves ambiguities for the taxation of transactions involving intellectual property”.