SDI Netherlands, B.V. v. Commissioner: an alternative solution for taxing royalties paid to foreign intermediaries Online publication date: Thu, 13-Nov-2008
by Todd W. Hood
International Journal of Private Law (IJPL), Vol. 1, No. 3/4, 2008
Abstract: The IRS and the Tax Court have adopted diametrically opposing positions regarding the source of income from royalties which arise from the use of patents within the US and which are paid from one foreign corporation to another foreign corporation. The purpose of this article is to argue that neither the Tax Court's approach nor the IRS's approach is satisfactory and to propose an alternative approach. However, before proceeding, this article examines the basic statutory scheme for imposing a withholding tax on royalties sourced within the US. Secondly, this article reviews the case law interpreting the statutory scheme prior to the Tax Court's holding in SDI Netherlands, 107 T.C. 161 (1996). Thirdly, this article considers the facts of SDI Netherlands in the context of the prior case law. Fourthly, this article reviews the reasoning of the IRS's and the Tax Court's approaches and delineates the weaknesses of each approach. Lastly, this article proposes an alternative solution based on a system of limited credits.
Existing subscribers:
Go to Inderscience Online Journals to access the Full Text of this article.
If you are not a subscriber and you just want to read the full contents of this article, buy online access here.Complimentary Subscribers, Editors or Members of the Editorial Board of the International Journal of Private Law (IJPL):
Login with your Inderscience username and password:
Want to subscribe?
A subscription gives you complete access to all articles in the current issue, as well as to all articles in the previous three years (where applicable). See our Orders page to subscribe.
If you still need assistance, please email subs@inderscience.com
Our Blog 
Follow us on Twitter 
Visit us on Facebook