The Effect Of Taxes On Royalties And The Migration Of Intangible Assets Abroad

Migration of intangible assets from the United States to foreign countries has become easier due to the ability of U.S. firms to create hybrid entities in their affiliates abroad and to reach favorable cost sharing agreements with them. This strategy was particularly encouraged by the U.S. adoption of "Check-the-box" regulations in 1997. Rather than receive royalties from affiliates abroad, US parent firms have an incentive to retain abroad in low-tax countries a greater share of the return to their US R&D.