Worried for the exam? No time to prepare well structured notes to bring with you? No problem. These schemes are intended to provide a step-by-step approach to each and every topic covered. They will enable you to save time and answer comprehensively to all exam questions. They combine: (i) lecture ...
Royalties are the remuneration for the temporary use of immaterial property 1
Step 1: para 1 & 2 (exclusive taxation in residence state)
Art. 12(1) -> ‘Royalties arising in a contracting state and beneficially owned by a resident of the other
contracting state shall be taxable only in that other state’.
o Elements:
A. Defining ‘Royalty’ payments
- In order to determine whether Art. 12 applies, it is crucial to determine whether the
payment2 made is to be defined as a royalty. If not, Art. 12 is NOT applicable.
- Art. 12(2) defines the concept of ‘royalties’:
(i) Entitlement to use34
o copyrights
o patents
o trade marks
o design or model, plans, secret formula or process
o information concerning industrial, commercial or scientific experience
(know how)
I. Important: difference between a sale and licensing -> given that Art.
12(2) specifies that a royalty presupposes the entitlement to use, it is
important to differentiate between ‘alienating’ (sale) and ‘letting’
(licensing):
(i) Sale -> A sale is characterized by:
a. transfer of the full ownership (ph. 8.2)5
o Where the ownership has been alienated, the
consideration cannot be for the use of the rights
b. unlimited in time
If the transaction is a sale (rather than a license) -> Art. 7 or 13 will
probably apply. NOT Art. 12!! (ph. 8.2)
(ii) Licence -> licensing is characterised by:
a. The separation of a right;
b. A payment
o For the use of the property, or
o The right to use the property
c. Temporary duration (ie limited in time)
o Different if property will be consumed
II. Important: difference between royalties and service fees
(i) Service fees -> a payment cannot be said to be ‘for the use of, or
the right to use’ a design, model or plan if the payment is for the
DEVELOPMENT of a design, model or plan that does NOT already
exist (ph. 10.2) Art. 7 applies
(ii) Royalties -> if the owner of a PREVIOUSLY-DEVELOPED plan
merely grants someone the right to use/modify/reproduce these
1
IMPORTANT: the leasing of industrial, commercial or scientific EQUIPMENT is NOT covered by Art. 12 (ph. 9) Arts.
5 and 7 apply
2
Payment -> defined in ph. 8.3
3
Irrelevant whether registered or not (ph. 8)
4
NOT (anymore) included: leasing (use of industrial, commercial or scientific (ICS) equipment (ph. 9: business profit)
(BUT: Article 12(3) UN-Model)
5
Payment may be in installments
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller matteobarchi97. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $5.97. You're not tied to anything after your purchase.
