Can I move my profit by registering the IP in another country?
No. Registration determines where a right is protected; it does not determine where the profit from that right belongs. Entitlement to the return on an intangible follows the functions performed in relation to it, the development, enhancement, maintenance, protection and exploitation work, together with the control over that work and the assumption of its risks. Move the certificate and leave the people, and the return stays with the people. This is settled practice in every jurisdiction that applies arm's length pricing, so a structure built on registration alone is not a plan with a weakness in it; it is a position that will not be accepted when it is examined.
What counts as real substance for an IP holding company?
People who can do the work the company is credited with, and evidence that they do it. In practice that means employees or officers with the technical and commercial competence to direct development, decide on protection and enforcement, set licensing terms, and accept the consequences if the asset underperforms. Board minutes recording the decisions, budgets the company itself approves, and correspondence showing it instructing rather than being instructed all support the position. An address, a bank account and an annual signature do not. The test is comparative: if the decisions are being taken by people employed by another group company, that company has the better claim to the return.
Who is entitled to the profit an intangible generates?
The entity or entities performing and controlling the functions that create and sustain its value, in proportion to what each contributes. Legal ownership is the starting point of the analysis rather than its conclusion. Where one company funds development and another carries it out, the funder is entitled to a return for the funding and the risk it genuinely controls, and the developer is entitled to the return on the development work. Splitting that fairly is difficult, which is why it needs a functional analysis written at the time rather than a conclusion reached later. The analysis is the deliverable; the pricing follows from it.
Will my IP company get treaty rates on the royalties it receives?
Only if it is entitled to the treaty in its own right, which requires it to be resident where it says it is and to satisfy the treaty's conditions for benefits. Both turn on substance. A company holding title with no people is exposed twice: on the transfer pricing side it is entitled only to a funding return rather than the intangible return, and on the treaty side it looks like an entity interposed to obtain a rate. Settle this before the royalty flows, because a withholding claim refused after payment is recovered slowly if at all, and the counterparty has usually already accounted for the tax.
Is it a problem if our developers and our IP sit in different countries?
That arrangement is common and it is not automatically wrong, but it has to be priced for what it actually is. If the holding company funds the work and the developers carry it out under their own direction, the developing entity is performing the functions and is entitled to the return on them, while the holder is entitled to a return on the funding. If the holding company genuinely directs the programme through its own people, the analysis is different. The question is never where the asset is registered; it is who decides what gets built, what gets protected and on what terms it is licensed.
What return does a company that only holds legal title earn?
A funding return. Where a company provides capital but performs none of the development, enhancement, maintenance, protection or exploitation functions and controls none of the associated risk, it is entitled to compensation for making the money available, not to the profit the intangible produces. That is a materially smaller number than the royalty stream such companies are usually credited with, and the difference is taxed in the entities that did the work. Groups discovering this late face adjustments in more than one country at once. Establish the entitlement at the outset and document the functions as they are performed, because reconstructing them years afterwards is much weaker evidence.
Does a foreign-owned US entity need an EIN?
Yes, for almost anything it must do: file its returns, operate payroll, open a bank account, and act as a withholding agent on payments abroad. It is applied for on Form SS-4, and the part that stalls foreign owners is the responsible party — a real person with a US identification number is expected, and where none exists the application route and the supporting explanation both change. It is worth starting early because downstream registrations queue behind it. See EIN applications.
Should I use a branch or a subsidiary abroad?
A branch is the same legal entity operating in another country, so its profits and losses sit with the parent and it is taxed there as a permanent establishment. A subsidiary is a separate company, taxed in its own right, with dividends and withholding on the way home. Losses, repatriation cost and liability usually decide it, and the answer differs by country pair. See branch vs subsidiary.
