IP holding & substance — is this a do-it-yourself job?
Some of it, yes — and we will say so on the call if that is the honest answer. The parts that are worth paying for are the ones where a missed election, a missed deadline or an unverified threshold costs more than the fee: the development, enhancement, maintenance, protection and exploitation functions determine entitlement to the intangible return, and treaty access requires substance in the holding jurisdiction.
What if I have already filed and got it wrong?
That is a common starting point. We re-derive the position, identify whether an amendment or a disclosure route is the right vehicle, and tell you which one preserves the relief that is still available. The order matters more than the speed.
How long will it take?
It depends on the documents rather than on us. Once the pack is complete most filings turn around inside a fortnight; anything that needs a certificate from a tax authority runs on that authority's timetable, which we tell you at the start rather than at the end.
Can I move my software profits by registering the IP in another country?
Registering a right somewhere does not move the profit there. Entitlement to the return on an intangible follows the functions actually performed around it: its development, enhancement, maintenance, protection and exploitation. If your engineers, product decisions and commercial risk sit in one country and the registration sits in another, the profit is attributed by reference to the first. A company holding title with nobody in it is treated as having provided funding, and a funding return is a small fraction of what an intangible earns. Transferring registration is the easy part of the exercise and the part that achieves the least on its own.
Who is entitled to the profit from software developed by my overseas team?
The entity or entities whose people perform the functions that create and sustain its value, and which bear the associated risk. Legal ownership is a starting point rather than the answer. Where development happens in one company, product and pricing decisions in another, and enforcement in a third, the return is divided among them according to what each actually does. This is why the first task in any review is a factual one: who does what, where, and who has the authority to decide. Only after that is settled do the agreements and the pricing get written, and they should describe the same arrangement.
Does my IP company need employees to claim treaty benefits on royalties?
Treaty access requires substance in the holding jurisdiction, and substance means people exercising real functions there. A company with title and no people struggles on two fronts at once: it earns only a funding return on the intangible, and its entitlement to treaty benefits on the royalties it does receive is exposed. The two problems have a common cause, which is that the entity is not doing anything. The fix is either to place genuine functions in the jurisdiction, with people competent to perform them, or to accept that the structure will be taxed according to where the functions really are.
Our licence agreement does not match what each company actually does?
Then the agreement will not be what determines the outcome. Where the contractual allocation of functions and risk differs from the observed conduct of the parties, examiners work from the conduct. A licence stating that the holding company controls development, when every engineer and every product decision sits in an operating subsidiary, does not create control; it creates a documented inconsistency to be explained. There are two honest routes out. Change the agreements to describe what happens, and price them accordingly. Or change what happens, by moving the functions to the entity the agreements say performs them. Doing neither leaves the worst version of both.
What return does a company that only owns the patent actually earn?
A funding return. It has provided capital and it holds legal title, so it is compensated for the capital it put at risk, and that is a different and much smaller thing than the return on the intangible itself. The rest belongs to the entities whose people carry out the development, enhancement, maintenance, protection and exploitation functions. Owners often find this counter-intuitive because title feels like the thing that matters commercially. In an intercompany analysis it is the functions that matter, and title without functions is treated as an investment rather than as ownership of a profit-earning business.
Can I set the royalty rate between my own companies myself?
Not freely. The rate has to reflect what each party contributes, which means the functional analysis comes first and the rate is derived from it. Choosing a percentage because it looks reasonable, or because another group uses it, gives you a number with nothing behind it, and the absence of supporting analysis is itself what draws attention on review. Document the functions each entity performs, the risks each genuinely controls and can bear, and the assets each provides. The rate falls out of that. Prepare that file when the arrangement starts, because reconstructing who decided what several years later is rarely convincing.
How is a GILTI inclusion calculated, in outline?
Start at the foreign company: its tested income or loss for the year, computed under US principles. Aggregate those across all your controlled foreign corporations, net the losses, then reduce by a return on qualifying tangible business assets less certain interest expense. What remains is your inclusion, brought into your own return, where the deduction and any credit are applied. Every one of those percentages has been amended, so the mechanism is stable and the arithmetic is year-specific. See the GILTI inclusion and Form 8992.
Are foreign trusts taxable in Canada?
They can be. Canada's deemed-resident-trust rules can pull a non-resident trust into the Canadian tax system where there is a resident contributor or, in some cases, a resident beneficiary — taxing it as though it were resident here. Separate reporting applies to transfers or loans to a non-resident trust and to distributions and debts from one. The planning point is that contributing to an offshore trust from Canada rarely achieves what the brochure suggests. See non-resident trusts.
