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US Chamber Ranks Singapore Highly As IP Domicile

by Mike Godfrey, Tax-News.com, Washington

14 March 2016


The US Chamber of Commerce has released its 4th annual International IP Index report, "Infinite Possibilities," highlighting the robust framework for protecting intellectual property in Singapore in particular.

The report has been released amid debate in the United States on research and development tax incentives and whether to introduce a patent box regime.

It was released days before the publication of a report from the US Joint Economic Committee of the House and Senate, which examined US research and development tax incentives' competitiveness compared with the offerings of other territories. That report found that although the US has attractive "front-end" tax incentives, which incentivize initial and ongoing investment, many jurisdictions, including those in Europe, are bolstering their domestic regimes. It concludes that without reform, the United States will continue to face fierce competition for businesses considering where to locate their innovative activities.

The US Chamber said that Singapore serves as a model for IP protection in Southeast Asia. Its Index, produced by the Chamber's Global Intellectual Property Center (GIPC), highlighted Singapore's strong IP system, and noted that it will be further strengthened – particularly in the pharmaceutical IP sector – should the standards enshrined in the Trans Pacific Partnership (TPP) be ratified and implemented. The United States ranked first out of the 38 economies studied, while Venezuela finished last.

Overall, half of the 38 economies improved their total score from last year's Index, indicating increased recognition of the benefits of intellectual property (IP) and a strong IP system. The 38 economies benchmarked in the 2016 Index accounts for nearly 85 percent of global gross domestic product (GDP). The index is based on 30 measurable criteria critical to innovation, including patent, copyright, and trademark protections, enforcement, and engagement in international treaties, among other things.

"This year's Index illustrates that many countries embraced the upward momentum in the global intellectual property environment, and continued to take steps to improve their IP systems. The Index provides policymakers on nearly every continent with an important tool to grow their economy and attract foreign business," said David Hirschmann, President and CEO of GIPC. "IP underpins the innovation we have come to expect – the new cell phone to connect with loved ones, the medical treatment to save a life, and the creative content we crave. IP creates the infrastructure to deliver new innovative technologies to markets around the world, and the US Chamber Index provides economies with a roadmap to furthering this legal framework."

"The Index was created so that countries around the world, such as Singapore, can hear directly from the business community on the IP-related issues important to them when considering investing in new markets," said Mark Elliot, Executive Vice President of GIPC. "Now in its 4th edition, the Index has become a must-read for government officials in countries near and far who recognize the important connection between IP and innovation, and who wish to grow their countries knowledge-based economies. We hope that policymakers and stakeholders will agree that when it comes to strengthening innovation-based opportunities, there truly are infinite possibilities."

In the 2014 Budget, Singapore extended both the additional 50 percent tax deduction for R&D projects for ten years until the 2025 year of assessment (YA), and the tax deduction for Economic Development Board-approved R&D projects until the 2020 year of assessment. The Writing Down Allowance on a straight-line basis for the acquisition of qualifying intellectual property rights was also made available for a further five years until the 2020 year of assessment.

In addition, R&D claims for qualifying activities can be made under Singapore's Productivity and Innovation Credit (PIC) Scheme. The PIC scheme was also been extended for three years until YA2018, and a PIC+ scheme introduced, under which qualifying small- and medium-sized enterprises can claim a 400 percent tax deduction for up to SGD600,000 (USD481,000) of expenditure per qualifying activity per year of assessment.

Meanwhile, the US provides "front-end" tax incentives, such as an immediate deduction of R&D expenses and an R&D tax credit, which are applied when a firm invests in research and development. In May 2015 senators Rob Portman (R - OH) and Chuck Schumer (D - NY), the co-chairs of a US Senate Finance Committee working group responsible for examining international tax reform, backed proposals for a patent box regime in the United States, which would unlock a concessionary rate of income tax on income from intellectual property. And, in the House of Representatives, Ways and Means Committee members Charles Boustany (R – LA) and Richard Neal (D – MA) introduced an innovation box discussion draft in July 2015 to "start the conversation." The draft outlines a plan that would tax domestic IP profits at a 10 percent rate through a 71 percent deduction, while allowing companies to repatriate IP from foreign subsidiaries on a tax-free basis.

According to the US Joint Economic Committee's report, the greatest tax benefit from this regime would go to companies with high IP profits, high domestic R&D costs, and relatively low total costs.

TAGS: environment | Finance | tax | investment | business | Venezuela | tax incentives | mining | Intellectual Property | intellectual property | gross domestic product (GDP) | copyright | Singapore | enforcement | United States | tax reform | standards | trade | research and development | Europe

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