December 28, 2019
In January 2019, Siemens AG has transferred the ownership in its trademarks to a recently established IP holding subsidiary, Siemens Trademark GmbH & Co KG. By doing so, Siemens had to report the value of this non-cash contribution in its financial statements. The trademark portfolio was valued at EUR 9,510 million, including a deferred tax liability of EUR 1,505 million.
In the future, Siemens Trademark GmbH & Co KG will grant the rights to use the Siemens trademarks to Siemens AG and its subsidiaries, and in return receive royalties. From January to September 2019, royalty payments amounted to EUR 584 million. Considering all publicly known parameters (trademark value, trademark revenues, royalty payments, tax liability and the indefinite term of the license agreements), the likely royalty rate applied in both the valuation and in the licensing back arrangements is 1.0% on trademark related revenues.
One of the reasons for this internal restructuring was a trade tax reduction. Siemens Trademark GmbH & Co KG is domiciled in Kemnath, the city with the lowest trade tax multiplier in Bavaria (factor of 230%). For the royalty income received by Siemens Trademark, this results in a corporate tax rate which is 8 percentage points lower than for the German average, or annual tax savings in the area of EUR 65 million.
We also had a look at the public rankings of the largest or most valuable brands in 2019. Brand Finance valued the Siemens brand at US$ 21.6 billion (two times higher than Siemens’ own valuation). BrandZ (Kantar Millward Brown) valued it at US$ 15.224 billion. Interbrand got it just right, with a brand value of US$ 10.259 billion. What does this tell us? Don’t trust these rankings too much.