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Germany has recently changed the interpretation of its existing tax laws with the result that income from the sale and licensing of registered IP effective in Germany, which includes EU-wide IP rights, such as European Trade Marks and Registered Community Designs, as well as national German IP registrations, is now subject to German withholding tax. This applies even where none of the participating foreign businesses have a presence in Germany. For example, a US business which sells an EU Trade Mark to a Japanese business will face the withholding tax liability on the proceeds of sale even if neither business operates in Germany.
Up until the end of 2020, IP revenue (whether arising on the disposal or on the licensing of IP rights) was only taxable in Germany if either party to the agreement was resident or had a taxable presence in Germany.
This major change by the German Ministry of Finance creates significant commercial and tax risks to businesses who have sold or licensed German or EU-wide registered IP since 1 January 2015 and could result in an outstanding and significant tax liability in Germany for such businesses. The amount of tax is dependent on how the value of the IP is determined and could be considerable in some instances.
Please refer to the information sheet for details on how to avoid issues (including potential criminal penalties) by taking action now.
Please do get in touch with your usual Fieldfisher contact, or any member of our IP and tax teams, should you require assistance ahead of the 30 June 2022 deadline.