Do we pay tax if we move our software to another group company?
Usually yes. Moving intellectual property across a border is treated as a sale for tax purposes, even when no invoice is raised and no money moves. The transferring company is treated as having disposed of the asset for what it is worth, and tax falls due on the difference between that value and its tax cost. Groups are often caught out because internally the transfer feels like paperwork: the code is the same, the repository is the same and the developers stay at their desks. None of that changes the analysis. Work out the charge before the transfer is documented, not in the following year's return.
How is intellectual property valued when it moves between group companies?
On the income it is expected to generate in the future, not on what it cost to create. That means building a forecast of the returns attributable to the intangible, deciding over what period those returns persist, and discounting them. Development cost is a poor proxy because successful intangibles are worth far more than they cost and unsuccessful ones far less. The forecast is where the argument happens, so the assumptions need to be the business's own, documented at the time and consistent with what management told its board and its lenders. A valuation prepared afterwards to support a chosen number rarely survives scrutiny.
Our developers stayed put, so does the IP transfer still count?
It counts, and where the people stayed is itself the central issue. The framework asks who develops, enhances, maintains, protects and exploits the intangible. Legal ownership sits wherever the register says, but profit follows those functions. So a group that moves title to a company with no technical staff, while the same team in the original country continues to write, improve and defend the product, has moved the paperwork and not the substance. Expect the profit to be attributed back towards where that work is done. If the intention is a real move, the functions need to move with the title.
Who gets the profit if one company owns the patent but another built it?
Legal ownership entitles the owner to a return for funding and bearing risk, but it does not by itself entitle it to the whole profit. The company whose people develop, enhance, maintain, protect and exploit the intangible is entitled to be rewarded for that work, and the reward has to reflect how significant those functions are rather than being a token fee. Where all the substantive activity sits in a different country from the registered owner, most of the income can end up attributed there. That is why registering title in a low-tax company, without moving anything else, rarely achieves what groups expect.
Is licensing better than selling when moving IP to another country?
They are different transactions with different consequences, and neither is automatically better. A sale crystallises value at a point in time and taxes the accrued gain then. A licence leaves ownership where it is and creates a stream of royalties priced on what an unrelated licensee would pay, which is tested year after year and may attract withholding tax. Which is appropriate depends on where the development functions sit, what the group intends to do with the asset, and what the treaty between the two countries provides. Decide before the legal work starts, because the documentation is difficult to recharacterise afterwards.
What records do we need to support the price of an IP transfer?
Keep the material that shows how the figure was reached and who did what. That means the valuation model with its forecasts, growth and discount assumptions and the source of each one, the board or management papers that discuss the transfer, and evidence of the commercial reason for it. Alongside that, keep a functional record: which people in which country develop the asset, who decides on enhancement, who funds and controls the risk, who defends it against infringement, and who exploits it commercially. The second file is the one groups fail to keep, and it is the one that decides where the profit belongs.
How does cross-border tax planning work?
It starts with facts rather than structures: which countries have a claim on you, what each one taxes, and where the two overlap. From there the decisions are about order and timing — which country taxes first, where relief is claimed, and whether a filing or a certificate has to be in place before money moves rather than after. Most of the value is in the sequencing, because relief claimed late is usually relief recovered slowly. See international tax planning.
How would a foreign tax authority know I am resident there?
Mostly from information you or your bank already provided. Account-opening forms ask you to self-certify tax residence, and that certification is reported between authorities under the Common Reporting Standard or, for US accounts, under the FATCA framework. Beyond that: employer and payroll filings, property registries, immigration records and the tax filings of anyone who paid you. The realistic planning assumption is that the data arrives. See FATCA and information reporting.
