March 2 2016
People who own patents in India are suddenly in demand – in many cases not because of the value of their inventions that may be worthless, but as a conduit to launder money .
There have been many cases in recent months where patent owners made millions by selling intellectual property to front companies abroad, under deals tailored to round trip unaccounted money back to the economy as legal earnings, say tax experts. Innovative and cheap money laundering tricks like this, they warn, could render the amnesty scheme unveiled in Monday’s Budget unattractive to black money holders.
Using patents to launder money is a relatively new technique. Explaining the modus operandi, a tax expert said an Indian company or individual first forms a partnership with the patent holder. The patent is then sold to a firm outside India and the money is received legally, paying income tax at the government rate of 10 per cent for such earnings.
“The catch is, the company outside India is a front,” said the tax expert, who requested not to be named. The money involved is often originated in India and sent abroad via havala or other illegal networks.