Abstract

The subject of this thesis is the concept of royalty. The purpose of the thesis is to examine the concept of royalty in international relations in order to give the currently most important principles for the definition of the concept of royalty.

Part 1 introduces the topic and scope of the thesis, covering introductory aspects and methodological considerations relevant to royalty. It highlights the detailed understanding of applicable law and outlines the plan for the thesis.

Part 2 is divided into three chapters. Initially, it delves into the OECD’s Model Tax Convention, particularly Article 12, paragraph 2, to explore the layered meanings of royalty across domestic law, tax treaty law, and the interest/royalty directive. This analysis forms the basis for presenting key principles defining royalty, significantly influenced by the OECD’s commentary on this article. Subsequently, the thesis examines the determination of the source of royalty income, suggesting it is typically the place of payment, although other criteria, like the location of intellectual property use, may also apply. The final chapter of Part 2 addresses the qualification of rights within the royalty concept, emphasizing the lack of precise definitions for individual rights and the decisive role of intellectual property law in understanding these rights. The chapter considers how embedded royalties must be understood. It is concluded that there is no precise definition of the concept. Instead, the chapter highlights a number of character traits, which come to the fore in some examples given in the thesis. It is stated that payment is made for goods and services, but not for the use of intellectual property rights to which the payer otherwise has access in the same connection: the relevant royalties for intellectual property rights are embedded in the payments for goods and services.

Part 3 consists of four chapters addressing complex questions and boundary issues related to royalty income. Chapter 5 asserts that only payments for transferring a limited right to use the rights in question are considered royalties. Chapter 6 focuses on determining whether a payment qualifies as a royalty or should be included in a commercial enterprise’s profits, based on ex-Side 297amples from the OECD’s comments. It is generally concluded that the comments assume that only payments as consideration for the use of or the right to use the rights mentioned can constitute royalties.

Next follows chapter 7, which mainly concerns the border between articles 12 and 17. It is claimed that the provisions are mutually exclusive, but that there is a need to clarify a number of questions. It is being investigated in more detail how payments for image rights should be processed. It is argued that image rights under Danish law are protected according to general legal principles and good marketing practice according to the Marketing Act.

The final chapter in Part 3 concerns payments for ICS equipment. It is argued that ICS equipment was previously covered by the concept of royalty in the OECD Model Tax Convention, and that the definition of the concept of royalty still gives rise to problems. It is argued that ICS equipment only includes material/tangible equipment, and that ICS equipment only includes assets that are intended to be part of an industrial, commercial, or scientific process.

Part 4 concerns the conclusion of the thesis and a final and general summary of the concept of royalty is given at the end. It is stated that the most important thing about the concept of royalty is that it is about payments as consideration for the use of or the right to use the rights included in the concept, whereby ownership is not transferred but only a limited right to the rights, and where the payments do not have the nature of being remuneration for the provision of services.

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