1. European Expansion
Involving Intellectual
Property
The Swiss Perspective
Thomas Linder
San Francisco, January 9th, 2013
© 2013 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a subsidiary of KPMG Europe LLP and a member of the KPMG network of independent firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. 1

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opinions, memoranda, or other tax analyses contained in those materials.
The information contained herein is of a general nature and based on authorities that are subject
to change. Applicability of the information to specific situations should be determined through
consultation with your tax adviser.
© 2013 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a subsidiary of KPMG Europe LLP and a member of the KPMG network of independent firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. 2

3. US tax law:
Basics of IP Planning

4. Business Advantages and Potential Tax Benefits
 Potential business purposes
− Integrate newly acquired operations
− Centralize management functions by region
− Eliminate redundancies
− Consolidate IP ownership and entrepreneurial risk to make the
enterprise more nimble
− Provide greater focus on non-US markets
 Potential tax benefits
− Reduce financial reporting effective tax rate
− Reduce global cash tax rate
© 2013 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a subsidiary of KPMG Europe LLP and a member of the KPMG network of independent firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. 4

5. Key Issues to Be Addressed
 Jurisdiction of IP HoldCo and Principal Co
 Need to move or hire new personnel in principal location
 Character of future revenues for US and non-US tax purposes
− Important for subpart F and withholding taxes
 Conversion transactions from current structure
− IP “buy-ins”
− De-risking of manufacturers and distributors
− Corporate restructuring to facilitate cash movements
 Future IP ownership and funding structure
 Future transfer pricing policies
© 2013 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a subsidiary of KPMG Europe LLP and a member of the KPMG network of independent firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. 5

6. IP Ownership Alternatives
Option Pros Cons
 No upfront US exit tax cost (PCT) or  Permanent commensurate with income risk
License from foreign exit tax cost  High tax rate unless FTCs available
USP  “Hedge” if foreign profit goals not met
 Significant tax benefit potential if foreign  Periodic adjustment trigger in 1.482-7
ops successful  Potential tax detriment if foreign ops profit
Qualified
 Netting foreign IP with U.S. allowed goals not met
Cost Sharing
 Other safe harbors apply (U.S. T/B,
partnership)
 Significant tax benefit potential if foreign  No netting against foreign IP -- cross
ops successful licensing risk; also outside other safe
Nonqualified harbors
Cost Sharing  Freedom to structure arm’s length terms
without 1.482-7 restrictions  Potential tax detriment if foreign ops profit
goals not met
 Potentially no US exit tax cost (PCT)
on transferred IP and/or royalty  Complexity of partnership allocations
IP  Ongoing tax benefits of CSA available  Complexity of deferral planning
Partnership  Special allocations can enhance tax
planning
© 2013 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a subsidiary of KPMG Europe LLP and a member of the KPMG network of independent firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. 6

7. Switzerland

8. Low tax rates…
Schaffhausen
16.0%
Basel
Thurgau
Thurgau
22.5% 16.4% AR
Aargau
Aargau Zürich
Z ü rich AI
21.3% BL
Jura
Jura 20.7% 18.9% 21.2%
12.7%
21.9%%
SO St.
St. Gallen
Zug
Zug
Luzern
Luzern Gallen
Bern 15.1% 17.1%
21.0% 12.1% Schwyz
Schwyz Glarus
Neuchâtel
21.6% Glarus
Neuchatel 14.0%
OW NW 16.5%
12.7% Uri
Uri
19.6% Bern
15.1% Graubünden
Fribourg
Fribourg
Vaud
Vaud 16.7%
23.5%
Ticino
Tessin
Valais
Valais 20.7%
24.2%
21.6%
Genève
© 2013 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a subsidiary of KPMG Europe LLP and a member of the KPMG network of independent firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. 8

9. …but not a tax haven jurisdiction!
Foreign
Swiss Multinationals
Multin.
24% of GDP
10%
 Strong domestic industry
 Export oriented
Swiss Domestic Businesses
 High production cost
66% of GDP
© 2013 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a subsidiary of KPMG Europe LLP and a member of the KPMG network of independent firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. 9

10. Swiss Mixed Company – Basic Concept
 “Multi-purpose” vehicle
Parent Co
 Statutory ETR of 8.5 – 12%
 Applies to Swiss branches of
foreign companies as well
 Reduction of tax base can lead
Swiss
to substantially lower ETR Company
• Depreciation (IP) Income Expenses
(80%) (80%)
• Hybrid instruments
• Branch exemption
Foreign Company Foreign Company
• Principal company
Statutory ETR of 8.5 – 12%
Further reduction of ETR through base erosion
© 2013 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a subsidiary of KPMG Europe LLP and a member of the KPMG network of independent firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. 10

11. Case Study 1: Pharmaceuticals
US Parent Co
Lux Holding
Company
Fee Mgt
Contract Swiss Foreign Limited
Manufacturers Principal Risk Distributors
IP
Customers
ETR of 5 - 8%
© 2013 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a subsidiary of KPMG Europe LLP and a member of the KPMG network of independent firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. 11

12. Case Study 2: Internet based business
US Parent Co
Lux Holding
Subscribers Company
Mgt Fee
Swiss Foreign Rep
Headquarters Companies
Market
Royalty
Support Fee
Merchants Foreign IP
Company
IP
ETR of 2 - 5%
© 2013 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a subsidiary of KPMG Europe LLP and a member of the KPMG network of independent firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. 12

13. Case Study 3: Electronics
Parent Co
Swiss NL Holding
Principal Company
IP
Fee
Mgt
Foreign Limited Foreign Contract Foreign
Risk Distributors Manufacturers Management
Customers
ETR of 2 - 5%
© 2013 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a subsidiary of KPMG Europe LLP and a member of the KPMG network of independent firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. 13

14. Thomas Linder
Director, International Corporate Tax
KPMG AG
Badenerstrasse 172
8004 Zurich
Email: tlinder@kpmg.com
Phone: +41 44 249 23 07
Mobile: +41 79 597 67 72