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Effective Intellectual Property Tax Planning is Essential When Developing Business Strategies

July 11, 2023

Businesses commonly focus on creating, protecting and monetizing their intellectual property assets. However, there can be instances when businesses neglect to effectively manage their intellectual property assets, in view of applicable tax jurisdictions, and such oversight could sometimes lead to unfavorable tax consequences.

Shortsighted intellectual property tax planning, for example, could cause a business’s intellectual property profits to accumulate in a jurisdiction with a higher tax rate. Shortsighted planning could also deploy intellectual property assets among associated business entities, affiliates, or to third-parties in other countries, which leads to certain probable tax liabilities. Additionally, business mergers and acquisitions could find intellectual property assets located in tax jurisdictions where it is expensive to hold an asset, yet offers little in return. 

In particular, in a merger or acquisition, intellectual property tax planning must be a focal point when undertaking due diligence, and throughout the subsequent integration. In conjunction with this tax planning, an asset’s locale and value must be determined, any risks assessed, and probable opportunities identified. If the available intellectual property is poorly structured, especially from a tax perspective, it may not only potentially increase tax burdens, but also, this poor structure may likely not support the business strategy, which initially called for the merger or acquisition. Nevertheless, when the intellectual property is properly structured, in light of all of the tax implications, these intellectual property assets could create substantial value for the business.       

Every intellectual property asset has a life cycle. Throughout this life cycle, the asset will play a part in the business by offering certain benefits, which will change over time. Consequently, any short-term and long-term tax planning must be nimble, with ample forethought, to support the overall business’s strategies in view of such intellectual property assets.  

As a result, tax planning for intellectual property must be incorporated into any business strategy. Do not allow your intangible intellectual property assets to become an afterthought. Moreover, any tax-related risks should be acknowledged and managed within an effective intellectual property tax plan. Walter Haverfield’s attorneys provide thorough legal support and guidance to clients when undertaking such an approach to intellectual property tax planning.    

Kevin Soucek is an attorney with the Walter Haverfield Business Services Group, focusing his work on transactional matters, tax matters, and trademark law. He can be reached at 216.619.7885 or