Surplus from Capitalization of Intangible Assets Are Subject to Property Transaction Tax.

　Capitalization of know-how was considered securities transaction according to the relevant explanation issued by the MOF.  In line with the repeal of the securities transaction tax, however, capitalization of know-how became tax-free.  Pursuant to the rules prescribed by the MOF, capitalization of know-how will be considered property transaction and corporate shareholders who make capital contribution by providing the intangible asset they own (such as know-how) shall pay income tax pursuant to the relevant provision of the Income Tax Act on the surplus from the capitalization when the value of the asset capitalized is higher than its cost.

　As intangible asset such as know-how is proprietary asset, an individual or business making investment in a company with such asset is swapping their asset for the stocks in the invested company, i.e. one asset is being exchanged for another of a different kind.  Therefore, the income from the swap is taxable upon capitalization of the intangible asset.  (2007.7)

/EMA