The Use Of Offshore Jurisdictions To Distribute Intellectual Property

David Hardesty, E-Commerce Tax News

13 June 2000

A recent two-part article in E-Commerce Tax News deals with the use of offshore jurisdictions for licensing and distribution of intellectual property. The article, by Professor David Hardesty, analyses some of the difficulties this raises.

Professor Hardesty chooses US legislation to illustrate his analysis, but points out that many other countries have similar legislation which is designed to ensure that companies don't manage to escape tax due on the sale of intellectual property from offshore jurisdictions.

Professor Hardesty characterises the legislation as 'monstrously complex'. He explains the rules applying to a transfer of intellectual property out of US jurisdiction, showing that careful tax planning is needed if penalties or excess tax demands are to be avoided. Using computer software as an example, the Professor shows that it would always be better if the software was written in the jurisdiction from which it is to be distributed.

The article explains that the development of e-commerce, and the use of offshore servers to distribute intangible intellectual property such as computer software, has created tax issues which existing legislation was not designed to handle.

Professor Hardesty concludes that there are advantages to be gained from offshore distribution of intellectual property or rights in it, but that extremely careful tax planning is needed in advance if pitfalls are to be avoided.

E-Commerce Tax News is written and distributed by
David Hardesty, CPA, MBA., author of
"Electronic Commerce: Taxation and Planning"

For the full article, see:

http://ecommercetax.com/doc/052100.htm

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