APPENDIX - I

Technical Assistance Agreements

• Specific duration of agreement
• Right to produce after expiry of agreement
• Export/buy-back arrangements
• Repartriation of profits/capital
• Conformity to contract laws of recipient country
• Conformity between TA contract and contracts for machinery/consultancy services, etc.
• Clear defination of patent rights and transfer to recipient party
• Usage of brand names
• Royalty - lump sum/fees
• Definition of products(s), i.e. product design, product specification, product range, quality etc.
• Access to foreign party's manufacturing and service operations: study of equipment, operating methods and sequences
• Assurances/warranties regarding manufacturing problems
• Assurances/warranties regarding technical objectives, i.e. product quality, productivity
• Plant capacity definition
• Initial testing of raw materials and finished product
• All materials, sub-assemblies and components: definition of scope, terms and price
• Services of foreign party, i.e. supply of technical personnel for supervision of construction, plant set-up and stabilisation: pricing base, procedures for securing these services and payment terms
• Training of local personnel by foreign party technicians
• Any limitations of recipient regarding information rights

Know - how agreements

A know-how agreement lies somewhere between giving technical assistance and granting patent rights. As a technical information package, it is usually unpatentable. The information is treated as confidental.

• Recitals and legal administrative provisions
• Definitions, grant of rights, obligations of each party
• Remuneration to the licensor
• Complemetary trademark rights or patents
• Permanence of agreement
• Communication of future improvements
• Freedom for sub-licencing
• Licencee right to:
  - Employ know-how without restructions
  - Expand facilities
  - Establish new manufacturing sites
  - Expand product range
  - Develop further products/processes
  - Make improvements through R&D
• For process industries, guarantees regarding:
  - Performance of know-how (in face of alternative raw materials)
  - Relative inputs of raw materials / energy consumption that affect product cost.
• Specifications of anticipated performance, detection/measurement of deficient performance, possible remedies
• Replacement of detective equipment, payment of liquidated damages, acceptance of lower royalty rates
• Mode of transfer of know-how
• Currency of technology transferred
• Supply of complete set of up-to-date, correct, legible, reproduceable manufacturing drawing with detailed specifications of all parts
• Supply of complete sets of up-to-date, correct, legible, reproduceable factory standard sheets/engineering standards for manufacturing machinery
• Descriptions of and procedures for all manufacturing process
• Complete sets of up-to-date catalogues
• Role and responsibility for each phase
• Product and plant capacity definitions
• Raw materials specifications
• Take-over of complete plant by licensee following guarantee tests and correction of all deficiencies detected at pre-commissioning and setting-up-stages
• Licencee's compliance with licensor's:
  - Technical standards
  - Instructions and recommendations
  - Specifications (machinery, tools and equipment)
  - Raw materials and products
  - Required levels of resources and skills.

[A know-how package covers a body of industrially useful, secret novel, valuable information, with associated technical information and skills lawfully in the prossession of the licencee design, construct and operate the required manufacturing plant for the products in question. All supplementary information (technical and otherwise) to complete the basic know-how package should also be provided to the licensor.]

APPENDIX - II

Key Issues for Tax Planning and Corporate Structuring

Purpose

• To allow for varying tax laws
• To minimize incidence of taxation

Worldwide Income tax concept
Residents or nations subject to tax on their worldwide income depending on their residence, nationality, domicile, center of economic interest, etc. applicable in countries like USA, UK, Japan, etc.

Territorial income tax concept
Resident or nationals of a particular jurisdiction taxed only on income or wealth arising, received or located in that particular jurisdiction.

No personal income tax
Applicable in countries like Brunei, Monte Carlo etc.

Corporate taxation
As personal taxation, corporation tax levied in respect of worldwide income or territorial income. Partnership or trusts are more tax-efficient and can be considered for structuring.

Withholding taxes
Applicable on dividends, interest, royalities, fees, etc., and relevant for corporate structuring.

Imputation system
Countries such as UK and Singapore follow an imputation system whereby the corporation tax is imputed to the dividends and the shareholders claim credit for such tax.

Double taxation
Countries such as Japan, USA, India, etc., follow a double taxation concept whereby dividends are subject to withholding taxes over and above the corporation tax.

Double tax treaties
To avoid double taxation and to provide a fair basis of sharing revenue, countries enter into bilateral double tax avidance agreements (DTAA). Two prominent models are the OECD model and the UN model. DTAA generally confers the right of taxation on the country in which the enterprise is resident and generally reduce the withholding taxes for dividends, interests, royalities, technical services, licene fees, etc.

Tax havens
To attract foreign investment and capital, certain countries follow a liberal or no tax regime policy, e.g. Bahamas, British virgin Islands, Monte Carlo, Luxembourg, etc. tax havens are widely used for trusts, foundations, holding companies, investment companies, offshore funds, banking companies, etc.

Anti-tax-haven laws
To prevent the abuse of tax havens, countries have promulgated anti-tax-haven laws, e.g. USA, Canada, Germany, Japan, France, etc. Hence tax laws of various countries provide anti-tax-evasion regulations for transfer pricing, arm's length test, etc.

Corporate structuring
In the corporate structure, laws and regislations such as company legislation, exchange control regulations, intellectual property rights laws, etc. have to be considered.

Foreign investment regulations
The corporate structure also has to be designed in conformity with the prevalent foreign investment regulations and in protection of foreign investors.