Who owns our IP if the code was written in another country?
Legal ownership follows your contracts and assignments. The tax answer follows conduct as well. Where research and development is performed, who funds it and who bears the risk of failure all feed into which country is entitled to the profit the intangible eventually produces. A holding company that owns the registered rights but does nothing, with no people, no decisions and no funding risk, is a weak position to defend. Check first that every founder, employee and contractor has actually assigned their work, because deep-tech companies frequently find gaps. Then make sure the group's agreements describe the arrangement that is really happening, and that they were signed when it began rather than reconstructed later.
Can we claim research incentives if our developers are abroad?
That depends on the incentive, and it is a question to settle before the claim rather than during an enquiry. Most research incentives are directed at work performed in the country granting them, and many restrict or exclude expenditure on work done elsewhere or paid to a foreign group company. A distributed engineering team therefore needs its costs tracked by where the work was performed, not simply by which entity paid the invoice. That record is also what a transfer pricing review will ask for, so the same evidence serves both purposes. Set up the time and cost records before the year in which you intend to claim.
Will moving our IP to a holding company trigger tax?
A transfer of an intangible between group companies is normally treated as a sale at market value, whatever is actually paid, so the question becomes what the intangible is worth on the date it moves. Moving early, before the technology has demonstrated value, is a very different exercise from moving after a product has traction, which is why this question tends to be asked a year too late. The country losing the asset and the country gaining it both have a view, and they may not agree on value. Expect to need a valuation, agreements made at the time, and a record of who performed and funded the work.
Our investors want a new holding structure, so what should we check?
Check what would move and what it is worth before agreeing anything. An investor-driven reorganisation usually proposes a new parent in a chosen country with the operating companies beneath it. If the intangible would move as part of that, the value on the day of the move is the taxable event, and that value changes with every month of product progress. Also check where your people actually work, because a structure assuming development sits in one country while the engineers sit in others will not survive examination. The structure has to describe the business. Anything else has to be unwound later, under pressure and at cost.
How do we evidence that our IP sits where we say it does?
With records made at the time, not a narrative written afterwards. The useful evidence is mundane: board minutes showing where technical decisions were taken, employment and contractor agreements carrying valid assignments, funding flows showing who bore the cost and the risk of failure, and project records showing where the work was performed. Where a group company is said to control development, there should be identifiable people there doing the controlling. Keep the intercompany agreements consistent with all of it. The test any authority applies is whether conduct matches the paperwork, and the paperwork is the part you can fix cheaply while the company is still small.
Do contractors abroad affect where our profits are taxed?
They can, on two separate fronts. The country where a contractor works may regard the relationship as employment on its own tests, whatever the agreement is called, which brings payroll obligations there. Separately, where that person's work is central to developing the technology, the country may argue that part of the resulting value belongs to it. Deep-tech groups often engage senior researchers as contractors for simplicity in the earliest period, then keep the arrangement long past the point where it fits what is actually happening. Review each engagement against the local tests where the person works, and confirm that every one of them has assigned their output.
Does California allow the foreign earned income exclusion?
No. California does not conform to it, so foreign salary a resident excludes on the federal return is still in the California base — and California does not give a credit for foreign tax in the way it does for tax paid to other states. The result is the same income taxed federally at zero and by California in full. Whether it applies at all comes back to whether you are still a California resident, which is the question worth answering first. See state residency and domicile.
What counts as foreign income, and what is a foreign tax?
Foreign income is income sourced outside the country you are filing in — where the work was done, where the property sits, where the payer is resident, depending on the type. A foreign tax, for credit purposes, is a levy imposed by another country that functions as an income tax and that you were legally required to pay. Consumption taxes, property taxes and most social contributions are not, however real the cost. Sourcing is decided by rule, not by which bank received it. See the foreign tax credit.
