In its decision dated 27/11/2020, RA 2019/15/0162, the Austrian Administrative Supreme Court (Verwaltungsgerichtshof) had to deal with a trademark licensing between Malta and Austria. The Austrian trading company MCo had demerged its business and real estate to the Austrian company XCo in 2007. The trademarks stayed with MCo. In a next step, the management of MCo and the trademarks were transferred to a Maltese permanent establishment of MCo. In an Austrian tax audit, the tax authorities denied the deductibility of the licence payments of approximately MEUR 50 for 2008 and 2009 from XCo to MCo. The Austrian Fiscal Court and the Austrian Supreme Court also denied the deductibility of the licence payments and attributed the beneficial ownership of the trademarks to XCo.
XCo had argued that the trademarks were generated by MCo and registered in the name of MCo. Furthermore, MCo was in charge of the international trademark protection, exercised its functions as an owner and bore the risk of an owner.
The main reasoning for the attribution of the beneficial ownership to XCo was that the main functions and decisions regarding the use of the trademarks were allocated to the – formal licensee – XCo. Based on the decision of the Supreme Court, the following points seemed crucial for the attribution of the beneficial ownership to XCo:
Unfortunately, the decision of the Fiscal Court has not been made publicly available. It would have offered a much better view on the facts of the case and the argumentation of XCo than the decision of the Supreme Court. Nevertheless, the decision should be analysed as regards any comparable structure. Especially with IP structures in low tax jurisdictions, taxpayers must look very closely as to whether the substance and the substance and risk profile are in a balanced relationship with the income attributed to that entity.
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