{"id":2075,"date":"2021-05-25T20:07:09","date_gmt":"2021-05-25T20:07:09","guid":{"rendered":"https:\/\/gtmtax.com\/insight\/tax-is-like-real-estate\/"},"modified":"2025-07-23T20:03:13","modified_gmt":"2025-07-23T20:03:13","slug":"tax-is-like-real-estate","status":"publish","type":"insight","link":"https:\/\/gtmtax.com\/insight\/tax-is-like-real-estate\/","title":{"rendered":"Tax is Like Real Estate: When Planning for IP and R&D, It’s All About Location, Location, Location"},"content":{"rendered":"
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Location Planning for R&D Tax Incentives<\/h1>\n

Multinational enterprises understand that implementing a tax efficient global intangible property (IP) strategy can be beneficial on many levels. When structured properly, the payoff can be well worth the investment. Benefits of a tax efficient IP strategy may include, for example, annual cash tax savings, a reduced global effective tax rate, and a higher enterprise value for exit planning purposes. However, IP planning should not be undertaken lightly, with myriad tax and non-tax factors to consider.<\/p>\n

While taxpayers almost universally consider income tax implications and model the relative tax rate differentials among various possible IP holding jurisdictions, often through a transfer pricing study, they sometimes overlook a key consideration: the availability of research and development (R&D) tax incentives. Incentives may be significant enough to influence the ultimate jurisdiction chosen for IP ownership and R&D activities.<\/p>\n

R&D Tax Incentive Considerations<\/h2>\n

There is a natural interplay between transfer pricing strategy and R&D tax incentives.\u00a0 Simply put, where there\u2019s transfer pricing there\u2019s usually IP, where there\u2019s IP there\u2019s usually R&D, and where there\u2019s R&D there are likely R&D tax incentives.<\/p>\n

From an R&D tax incentives perspective, there are several factors that come into play when choosing where to deploy R&D teams. They include:<\/p>\n

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  • The magnitude of R&D tax incentives in the jurisdictions under consideration;<\/li>\n
  • Whether or not IP must remain in the jurisdiction to claim incentives; and<\/li>\n
  • Whether all R&D has to take place in the jurisdiction.<\/li>\n<\/ul>\n

    More than 40 countries offer R&D tax incentives. While the recognition of what qualifies as R&D is similar in most jurisdictions, the tax treatment can be very different.\u00a0 The differences include:<\/p>\n

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    • Volume-based or incremental;<\/li>\n
    • Credit, deduction, or both;<\/li>\n
    • Refundable, carryforward, or \u201cuse it or lose it\u201d; and<\/li>\n
    • What can be included (e.g., capital equipment, overhead expenditures, software development).<\/li>\n<\/ul>\n