Universal Journal of Accounting and Finance Vol. 6(4), pp. 123 - 131
DOI: 10.13189/ujaf.2018.060401
Reprint (PDF) (280Kb)

International Processing INC. A Constructed Mini-case Reflecting Transnational Tax Issues Involving Intellectual Property

William V. Rapp ^*
Martin Tuchman School of Management, New Jersey Institute of Technology, United States

ABSTRACT

This case study reflects the work done for a large Fortune 500 technology based MNE facing various tax and royalty issues related to the use of its technology by its subsidiaries and affiliates as well as its licensing agreements with other companies in different countries. It also poses a series of R&D related issues facing the firm including where it should locate a new R&D facility outside the US. The issues posed in this case arise because each country where the firm does business has a different tax regime but in all cases each government wishes to maximize tax revenues. One way this is accomplished in countries where the subsidiaries are located is by limiting the royalties on technology transfers that subsidiaries pay to their parent firms and thus take as a deductible expense. Conversely the parent firm's government, in this case the US, wishes to maximize its taxes through having the firm's subsidiaries pay "full value" for the technology in the form of higher royalties. This creates a zero-sum game with the firm caught in the middle. The case offers some strategic approaches and ideas the firm can use to manage this situation.

KEYWORDS
R&D, Royalties, Taxes

Cite This Paper in IEEE or APA Citation Styles
(a). IEEE Format:
[1] William V. Rapp , "International Processing INC. A Constructed Mini-case Reflecting Transnational Tax Issues Involving Intellectual Property," Universal Journal of Accounting and Finance, Vol. 6, No. 4, pp. 123 - 131, 2018. DOI: 10.13189/ujaf.2018.060401.

(b). APA Format:
William V. Rapp (2018). International Processing INC. A Constructed Mini-case Reflecting Transnational Tax Issues Involving Intellectual Property. Universal Journal of Accounting and Finance, 6(4), 123 - 131. DOI: 10.13189/ujaf.2018.060401.