Taxation and the transfer of patents: Evidence from Europe

I study how taxes affect firms’ incentives to shift the location of intangible assets. Using firm-level data on patent reassignments, I exploit variations in statutory tax rates and the introduction of “patent box” policies as shocks modifying incentives to transfer patents across countries. The results suggest a large impact of taxes on asset shifting between affiliates, increasing with expected patent income, and driven by very large firms. Patent boxes are persistently associated with more incoming and less outgoing patent relocations between affiliates. These findings suggest that taxes provide firms with incentives to shift income via patent relocation, and advocate for considering patent transfer strategies in tax policy.