A payment due to the owner of an intangible asset for the use of that property by another person.
Royalties are most commonly due for the use of copyrights and patents.
Licence fees for the use of software rented to a user are closely akin to royalties.
As the quantity and value of intangible assets have risen in the world, so have the number and value of royalty payments.
Royalties have often been used as part of tax avoidance activity by transnational corporations. By registering the ownership of intellectual property in low or no-tax locations (whether tax havens or secrecy jurisdictions) they seek to transfer income from high-tax to low-tax jurisdictions to save tax overall.
The extent to which the number of patents and other intellectual property claims in the world has risen as a result of tax planning is not known, but the two are almost certainly correlated.
This has been the subject of scrutiny by the Organisation for Economic Cooperation and Development as part of its Base Erosion and Profits Shifting programme.
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