What are the taxes associated with selling patents and why should I hire an expert?

Explains taxes when selling patents and the benefits of asking a specialist

If you are interested in selling, buying or licensing a patent, P. J. Parker & Co. can help. Below are some points regarding tax when selling a patent. P. J. Parker & Co. is not a tax advisor. Therefore, companies considering selling a patent should always consult with a qualified professional tax advisor. Having a trusted professional will make it easier to navigate the process to suit your wishes and needs.

Basic knowledge of patent sales and taxes

A patent sale means transferring a patent right held by a company to another company. The patent right becomes the subject of a sales contract, and the buyer pays the seller a transfer fee. Income from a patent sale is subject to tax, so appropriate tax treatment is required.

Types of taxes on patent sales

What is capital gains tax?

Profits from the sale of a patent are subject to capital gains tax, just like land, buildings, stocks, etc. Capital gains are calculated by subtracting acquisition costs and transfer expenses from the selling price. In addition, capital gains are divided into “short-term capital gains” and “long-term capital gains” depending on the period of ownership, and the tax rates differ. Short-term capital gains apply when the period of ownership is 5 years or less, while long-term capital gains apply when the period of ownership is 5 years or more. A distinctive feature of long-term capital gains is that a lower tax rate is applied.

Since the application of tax rates based on long-term ownership can lead to tax savings, it is important to consider the period of ownership when planning the sale of a patent.

Handling of consumption tax

The transfer of assets carried out as a business is subject to consumption tax. Therefore, intellectual property rights such as patent rights are also included. However, there are certain exclusions in the Consumption Tax Act, for example, property transfers due to inheritance or prescription are not subject to taxation. In addition, if the sale is made by a tax-exempt business under the Consumption Tax Act, it may not be subject to taxation. A tax-exempt business is a business with annual taxable sales of 10 million yen or less.

Handling consumption tax on patent sales requires knowledge and understanding. By seeking the appropriate support from an expert, you can proceed with accurate calculations and declaration procedures.

Benefits of entrusting patent sales to an expert

When selling a patent, the support of intellectual property brokerage and tax professionals is essential.

Specialized knowledge to help you save on tax

Tax-saving measures for patent sales require expertise. Tax experts are familiar with complex tax laws and the latest information and can suggest measures to minimize the tax burden associated with the sale. Hiring an expert can help you implement tax-saving measures properly and reduce your financial burden.

When to request and how to choose

Timing of request

When considering hiring an expert in a patent sale, timing is important. We recommend consulting a tax expert early in planning a patent sale. The benefit is that you can develop appropriate tax strategies before you begin the sale process. A tax expert can provide strategies to reduce the tax burden associated with the sale. Patent expertise is needed throughout the patent sale process, from the pre-sale stage to assess the feasibility of selling your patent portfolio, to selecting potential buyers, and negotiating the price and other terms of the deal.

Tips for choosing

The key to choosing a patent sales expert is to first check their experience and track record. Choose an expert with extensive knowledge and experience specialized in patent sales. Also, check the expert’s expertise and sales ability. By choosing an expert who can clearly explain solutions to questions and problems that arise in patent sales, patent sales will proceed smoothly. Also, consider costs and returns. Fee structures vary depending on the company, so get quotes in advance and compare services.

Patent sales are an important part of a company’s IP strategy. Patent sales are complex and require specialized knowledge. Any mistakes can lead to huge losses, so it is important to hire an expert. Hiring an expert can help minimize costs and complete the transaction quickly. This allows companies to incorporate patent sales as part of their IP strategy.

If you want to effectively and efficiently utilize your patents, contact PJ Parker. As a patent broker specializing in the high tech, IT, electronics, telecommunications, medical devices, and materials science industries, we can assist you in the sale, distribution, and licensing of your patents. We understand the constraints of your competition and patent environment, and we will achieve a win-win patent transaction. Please feel free to contact us.