Leasing of intellectual property and similar products, except copyrighted works

Income from ISIC 774 is only qualifying if derived from 'Qualifying Intellectual Property' such as patents or copyrighted software. The auditor must verify the 'Nexus Ratio' where qualifying expenditure must be incurred by the Free Zone Person to develop the IP. Royalties from non-qualifying IP are treated as taxable at 9% if they exceed the de minimis threshold.

Audit Red Flag

Classification of marketing-related IP (trademarks/brands) as qualifying income, which is strictly prohibited under the Nexus Approach.

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