2018 U.S. Cross-Border Tax Conference

May 15 – 17, 2018

kpmg.com

IP Planning: FDII and GILTI and DEMPE! Oh My!

AgendaIntroduction

Pre-2018 Offshore Structures

Post-2017 Outbound IP Planning

01

02

03

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The following information is not intended to be “written advice concerning one or more Federal tax matters” subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230.The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.

Notices

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Today’s presentersName Title Firm | Company

Name Email | Telephone

Steve Blough Principal KPMG LLP sblough@kpmg.com+1 202-533-3108

Sophia Boutilier Principal KPMG LLP sboutilier@kpmg.com+1 415-963-7341

Aroen Rambhadjan Partner KPMG Meijburg aroenrambahadjan@kpmg.com+1 212-954-1859

Wendy Unglaub Vice President, International Tax and Global Transfer Pricing Ecolab Inc.

wendy.unglaub@ecolab.com+1 651-250-3153

Tom Zollo Principal KPMG LLP tzollo@kpmg.com +1 312-665-8387

Introduction

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Changing rules, both in the US and abroad, require reexamination of existing IP structuresTax Cuts and Jobs Act (TCJA)— Tax on global intangible low-tax income (GILTI) – current year tax on income previously deferred— Foreign derived intangible income (FDII) regime – preferential rate on certain outbound sales/services— Base erosion anti-abuse tax (BEAT) – tax on certain deductible outbound payments — New anti-hybrid and excess interest rules— Participation exemption – dividends from controlled foreign corporations (“CFCs”) tax-free to US shareholdersEU Anti-Tax Avoidance Directives (ATAD)— Binding framework generally effective with phased in effective dates— Rules aimed at reducing tax arbitrage through use of subsidiaries, hybrid mismatches, excess interest expense,

and general anti-avoidanceBEPS— Country-by-Country Reporting (CbyC) / Master File

- Global financial data reporting shared between countries- CbyC reports basis of joint audits

Introduction

Pre-2018 offshore structures

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US Co

BV

LRDs

CVIP

Cost-sharing arrangement

Pre-2018 IP planning – CV/BV structureSummary— Offshore IP owner (CV) is a reverse hybrid that is not taxed in

the United States or the Netherlands— Disregarded BV conducts the substantive operations needed

for US subpart F purposes— BV pays royalty to CV to reduce Dutch tax base Factors Affecting the Structure— CbC reporting— DEMPE requirements— Anti-hybrid rules— Other ATAD issues— U.S. tax reform

Royalty

I/C Sales

Similar “onshore/offshore” structures are commonly used in other countries (e.g., Ireland and Switzerland)

IP planning 2018 and beyond

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Offshore Options—Replace CV with regarded (non-Dutch) CFC —CV grants “usufruct” to BV—CV transfers IP to BV, BV elects to be regarded, CV

liquidates—CV transfers IP to a new offshore principal

(e.g., Ireland, Switzerland, or Singapore)Repatriation Options―Sale to U.S.―Distribution of IP―Section 331 liquidation―Section 332 liquidation― “Die on the vine” license from CV to U.S.—

Terminate CSA

Pre-2018 IP structures – possible responses

US Co

BV

LRDs

CVIP

Cost-sharing arrangement

Royalty

I/C Sales

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Outbounding IP from the United StatesIs outbounding of IP from the United States still viable?—Changes to sections 367(d), 482, and 936(h)(3)(B)—Does FDII discourage or encourage offshoring of IP?—Finding foreign tax credits—Stage of development: Every Bigco has a start-up inside

Thank you

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The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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