{"id":52770,"date":"2023-02-23T11:03:46","date_gmt":"2023-02-23T05:33:46","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=52770"},"modified":"2023-02-23T11:03:47","modified_gmt":"2023-02-23T05:33:47","slug":"trademark-valuation-and-taxation","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/trademark-valuation-and-taxation\/","title":{"rendered":"Trademark Valuation and Taxation &#8211; A Complete Analysis"},"content":{"rendered":"\n<p>A trademark includes symbols, colour, shape, packaging, etc. that\nencompasses a party&#8217;s ability to geographically represent and distinguish that\nparty&#8217;s goods or services from others. The use of these marks by the owner\nwithout the participation of other persons. Trademarks are an important\ncommercial and economic tool and are typically used extensively to create brand\nvalue for a company. <strong><a class=\"text-primary\" href=\"https:\/\/corpbiz.io\/trademark-registration\">Trademark<\/a><\/strong> is a set of rights that provides\nexclusive use to the owner &amp; builds goodwill for the products or services\nwith which it is associated. The Trademark owner can transfer their Trademark\nrights in the Trademark to others, just list property transfer. Thus, it is\nconsidered an intangible asset for a business. In this blog we will discuss\nTrademark Valuation and Taxation.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">What\nis Trademark Valuation and Taxation?<\/h2>\n\n\n\n<p>Let\u2019s discuss the meaning of Trademark Valuation and Taxation:<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Trademark\nValuation <\/h3>\n\n\n\n<p>When it comes to selling or buying a property, the first step is to\ndetermine the value of the property in question. Brands are no different! Brand\nvaluation is particularly important because intangible assets are often valued\nat a higher price than tangible assets.<\/p>\n\n\n\n<p>Price generally boils down to the price the seller intends to sell and\nthe buyer is willing to buy.<\/p>\n\n\n\n<p>When it comes to evaluation, the process is much more complicated than\nit seems. Sellers often end up in corrections for two reasons. First, to\ndetermine the correct value of the existing brand, and second, to find\npotential buyers willing to buy it at a specified price.&nbsp;<\/p>\n\n\n\n<p>Valuation analysts are often called upon to assist clients with\nintellectual property matters. These intellectual property issues include: the\nstructuring of sales or licensing transactions.&nbsp;<\/p>\n\n\n\n<p>When it comes to brand valuation, the process is more complicated than it looks. Sellers often find themselves in a dilemma for two reasons:<\/p>\n\n\n\n<ul><li>Determination of the value of the right to the Mark in the hands;<\/li><li>Identify potential buyers who want to buy it at the specified\n     price.<\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>How to\nKnow the Value of Your Product?<\/strong><strong><\/strong><\/h3>\n\n\n\n<p>The value of a brand resides in the goodwill associated with that brand.\nGoodwill is an intangible asset that forms part of a brand owner&#8217;s business\nvalue. Assigning a monetary value to goodwill can be quite difficult as there\nare many variables to consider. For example, reasonable people cannot agree on\nfuture business expectations, such as business value opportunities, competitive\nthreats, and market risks that could affect goodwill value and, therefore,\nbrands. Which symbolize this surplus value.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Various\nMethods of Trademark Valuation<\/strong><strong><\/strong><\/h3>\n\n\n\n<p><strong>Market Approach Method: <\/strong>Product brands similar to the one under evaluation\nare researched and compared to determine their value. Sell, buy, franchise,\netc. to find a solution here. Studying market information.<\/p>\n\n\n\n<p><strong>Cost Approach Method: <\/strong>This approach consists of listing the costs incurred\nat the time of the creation and design of the brand. The cost also includes\nexpenses incurred in brand marketing and advertising. It is one of the most\ncommon methods for determining the economic value of the brand. The major\ndownside to this method of approach is that it fails to deliver the value\nassociated with brand goodwill.<\/p>\n\n\n\n<p><strong>Future Revenue Approach:<\/strong> This is one of the most preferred and viable\nmethods of arriving at the financial value of a brand. Here, a thorough\nexamination is done to get the future revenue figure that the brand would bring\nin the coming years based on its current value.<\/p>\n\n\n\n<p>In a business transaction involving the sale of a good, including an\nintangible such as a trademark, it is important to arrive at an exact price at\nwhich the seller is willing to sell it and the buyer is willing to buy within a\ncertain period of time. <\/p>\n\n\n\n<p>However, sellers struggle to find a price to sell the asset and find\nbuyers to buy at that price. Asset valuation can help the buyer determine their\napproximate value, including brand name, using various valuation methods.<\/p>\n\n\n\n<p>Entrepreneurs or brand owners are often concerned about the value of\ntheir brands. Thus, the valuation of brands is of great importance, especially\nwith the increasing number of cases where the value of intangible assets, such\nas brands, is considered to be higher than that of tangible assets.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Case\nLaw<\/strong><strong><\/strong><\/h3>\n\n\n\n<p>Brand valuation is a particularly important practice due to an increase\nin cases where the value of intangible assets such as <strong>intellectual\nproperty<\/strong><sup><a class=\"text-primary\" href=\"https:\/\/en.wikipedia.org\/wiki\/Intellectual_property\"><strong>[1]<\/strong><\/a><\/sup>\nis considered to\nexceed that of tangible assets, as was the case with Coca-Cola in 2006 In 07,\nbalance sheet capital was $16.92 billion and market capitalization was $124.42\nbillion. Thus, brands are valued mainly for three reasons:<\/p>\n\n\n\n<ul><li>Operational objectives (excluding tax).<\/li><li>Financial accounting assignments, tax purposes.<\/li><li>This article will focus on the tax aspect of trademark valuation.<\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\">Trademark\nTaxation<\/h3>\n\n\n\n<p><strong>Business income and capital gains<\/strong><\/p>\n\n\n\n<p>In Income Tax Commissioner v M\/S Mediworld Publications Pvt Ltd, 2011,\nthe Delhi High Court noted that copyrights, trademarks etc. are subject to\ntaxation.<\/p>\n\n\n\n<p>In addition, Section 2(14) of the Income Tax Act 1961 refers to\n&#8220;fixed capital&#8221; and is considered to include intellectual property.\nIn addition, Section 2(11) of the Income Tax Act 1961 states that intellectual\nproperty falls within the category of intangible property and contributes to\nthe development of business, generating profits. In addition, Section 28 of the\nIncome Tax Act 1961 also covers the sale of intangible property such as\ntrademarks.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Case\nLaw<\/strong><strong><\/strong><\/h3>\n\n\n\n<p><em>Commissioner of income tax c. Maruti Suzuki India Ltd. <\/em>The Delhi High Court ruled on the\naspect of transfer pricing when efforts to promote an associated company\nsignificantly increased the value of a brand legally owned by another. . The\nissue in this case is whether the income derived from the trademark should be\nattributable to the trademark owner or related entity registered in India.<\/p>\n\n\n\n<p>Intellectual property includes creations of the mind such as inventions;\nliterary and artistic works; buildings; and symbols, names and images used in\ncommerce. As a form of property, intellectual property can be thought of as\nassets that can be bought, sold, mortgaged, exchanged, and licensed, just like\nphysical property. Intellectual property is protected only if the rights are\ngranted to the producers of the intellectual property. Intellectual property\ngives individuals, companies or other organizations the right to prevent others\nfrom using their creations.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Trade Surcharges\nReduce Tax Credits<\/strong><strong><\/strong><\/h3>\n\n\n\n<p>When granting trademark rights, please note that the licensee&#8217;s local\nroyalties are only deductible from income tax or corporation tax as an\noperating expense, not the German sales tax. In economic terms, 6.25% of the\ncost of the perpetual transfer of rights (including concessions and licenses,\nwith the exception of licenses which only allow the transfer of acquired rights\nto third parties) is added to the exchanges. In the case of a sales tax\nsurcharge (\u00a7 8 of the German sales tax law, GewStG), the profits of the company\nare therefore taxable.<\/p>\n\n\n\n<p>The location\/location of the property is required for tax purposes.\nHowever, the process of locating intangible assets is complex. In violation of\ninternational principles, the Delhi High Court ruled that the location of the\nowner of the relevant property would be considered the location of an\nintangible asset whether or not it is registered in India.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Location\nof an Intangible Asset in Trademark Valuation and Taxation<\/h2>\n\n\n\n<p>The identification of a property location is required for taxation\npurpose. However, the identification process of the location of intangible\nproperty is complex. In concurrence with international principles, the High\nCourt of Delhi held that location of the particular property owner would be\ndeemed the location of an intangible asset, regardless of it being registered\nin India. The Court reached this conclusion through a strict interpretation of\nSection of the IT Act. The Court held that the non-inclusion of the IPR under\nthe provisions of Section 9 clearly states the intent of legislature not to tax\nIPR owners located outside India even they earned profits in India via their\nrespective IPR.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Conclusion<\/h2>\n\n\n\n<p>The importance of trademark valuation and taxation continues to grow. Differences that exist in Trademark Valuation and Taxation in different jurisdictions make it difficult to find common ground in tax compliance for entities with global liabilities or operations. Such differences can also lead to double taxation.<\/p>\n\n\n\n<p><strong>Also Read<\/strong>: <br><a href=\"https:\/\/corpbiz.io\/learning\/monitarization-of-trademark-is-trademark-saleable-in-india\/\">Monitarization Of Trademark- Is Trademark Saleable In India?<\/a><br><a href=\"https:\/\/corpbiz.io\/learning\/online-trademark-registration\/\">Online Trademark Registration: A Detailed Guide<\/a><br><a href=\"https:\/\/corpbiz.io\/learning\/apply-for-online-trademark-registration-in-india\/\">How Can You Apply For Online Trademark Registration In India?<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>A trademark includes symbols, colour, shape, packaging, etc. that encompasses a party&#8217;s ability to geographically represent and distinguish that party&#8217;s goods or services from others. The use of these marks by the owner without the participation of other persons. Trademarks are an important commercial and economic tool and are typically used extensively to create brand [&hellip;]<\/p>\n","protected":false},"author":56,"featured_media":52778,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[2],"tags":[3136],"acf":{"service_id":"18"},"authorName":"Mariyam Zaidi","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2023\/02\/MicrosoftTeams-image-67.jpg","authorDescription":"Mariyam has completed BA.LLB from law college dehradun. She worked as a content writer in hotleads for 3 years.","postViews":3008,"readingTime":5,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/52770"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/56"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=52770"}],"version-history":[{"count":3,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/52770\/revisions"}],"predecessor-version":[{"id":52780,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/52770\/revisions\/52780"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/52778"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=52770"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=52770"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=52770"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}