Sunday, August 27, 2017

DEMPE, The Elephant In The Room For Multinationals


At the 2012 G20 Summit in Los Cabos, participants raised concerns about multinational corporations (MNCs) using tax avoidance structures to exploit inconsistencies and gaps between different legal systems in order to shift profits to low-tax (or no-tax) jurisdictions. The G20  charged the OECD with the responsibility of coming up with an action plan to avoid Base Erosion and Profit Shifting (BEPS).

The resulting Action Plan was adopted at the 2105 G20 Summit in Antalya.

On June 7th 2017, ministers and officials from 76 countries and jurisdictions signed a multilateral instrument (MLI) that will allow rapid implementation of the BEPS actions into more than 1,100 bilateral tax treaties already in existence among the parties.

The only 3 OECD members to not yet sign are the USA, Brazil and Saudi Arabia.

What does this mean for IP owners?

Because IP accounts for the majority of enterprise value for MNCs, a simple shift in IP ownership can have a large impact in transferring profits (and therefore taxes) to other jurisdictions. The Action Plan paid special attention to the role of IP in base erosion and profit shifting.

The ramifications for IP ownership could be profound.