Tax
DEMPE
Also known as development, enhancement, maintenance, protection and exploitation
DEMPE is the transfer pricing framework under which returns from an intangible are allocated to the parties that perform and control its development, enhancement, maintenance, protection and exploitation, rather than to whichever entity holds legal title to it.
In plain terms: Whoever actually does the work on the IP gets the profit from it, not whoever owns the paperwork.
Why it matters
DEMPE is why an intellectual property holding company with no people is entitled to a funding return and little else. Combined with the modified nexus approach for IP box regimes, it removed most of the value from moving intangibles to low-tax jurisdictions.
Common misunderstanding
Believing that assigning the IP to an offshore entity moves the income with it. Legal ownership alone entitles the owner to a return on capital; the functions carry the rest.
Read the full guideIP holding structures after the nexus rules