A “cascading tax” is a tax that is enforced more than once on the income from the same transaction or related transactions. A common example involves a back to back license in which:
- A non-U.S. individual or corporation (“A Co.”) licenses the rights to use intellectual property (“I.P.”) in the U.S. to another non-U.S. corporation (“B Co.”); and
- B Co. then sub-licenses the same rights to use the I.P. to a U.S. corporation (“C Co.”).