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Profit Participating Intellectual Property

1 May 2011
By Dr. Alexander Voegele, Bastian Gottschling, and Philip de Homont

This article, by NERA Special Consultant Dr. Alexander Voegele, Principal Bastian Gottschling, and Economic Analyst Philip de Homont, is the fifth in a series of ten articles produced by International Tax Review on tax-effective intellectual property management. The article presents a case study examining profit participating intellectual property. The authors examine a company that develops and constructs modern power plants. While the company is highly profitable in its home market, during a start-up phase in new markets the local entities of the company often incur losses for some time. The authors note that, to yield a well-founded and flexible royalty, the actual benefits that the local entities receive in their own markets must be demonstrated through a rigorous analysis of the economic fundamentals.