Getty Images Clashes with Revenue Over Foreign IP Royalties: A Closer Look at the Global Tax Tug-of-War

When a global giant like Getty Images enters a tax dispute, the ripple effects are felt far beyond its corporate walls. In a recent and notable development, Getty Images has locked horns with U.S. tax authorities over the treatment of foreign intellectual property (IP) royalties. The heart of the issue? Whether certain foreign withholding taxes on royalties should be eligible for a U.S. foreign tax credit.

Let’s break down what’s happening and why it matters for international businesses everywhere.

The Core Conflict: What’s at Stake?

Getty Images, a global leader in digital content licensing, recently challenged parts of the proposed Foreign Tax Credit (FTC) regulations introduced by the U.S. Treasury and the Internal Revenue Service (IRS). Specifically, Getty is targeting the “single-country license exception”, a provision that affects how and when foreign withholding taxes on royalties are treated for creditability under U.S. tax law.

At stake are millions in potential tax credits and the broader question of how U.S.-based multinationals can structure their global royalty flows without running afoul of American tax rules.

Getty’s Global Licensing Model

To understand Getty’s concern, consider its international licensing strategy. Getty licenses images and media through a chain of subsidiaries. For instance:

• Getty Ireland holds rights to the content and sublicenses it to

• Getty Australia, which distributes the media within Australia.

Under Australian tax law, Getty Australia must withhold tax on royalty payments to Getty Ireland because the income is deemed sourced in Australia.

However, despite a tax treaty between Australia and Ireland, these royalty payments are still taxed locally. Getty wants to ensure that these taxes are creditable against its U.S. tax bill, which would avoid a case of double taxation—paying tax on the same income in two different countries.

What Getty Wants from the IRS

Getty’s primary complaint is that the current wording in the proposed FTC regulations is too vague. It references complex principles from Sections 482 and 861 of the Internal Revenue Code—provisions that deal with transfer pricing and income sourcing—but offers little practical guidance on how to apply them in the context of royalty withholding taxes.

To address this, Getty has submitted formal comments through its law firm Baker McKenzie, urging the IRS to clarify the rules. They propose a simple fix:

If a licensee, like Getty Australia, performs substantial economic activity related to the IP in the country imposing the tax, then the withholding tax should be creditable.

This approach, Getty argues, aligns better with Section 861’s intent, which focuses on where the income-producing activity actually occurs.

Why This Matters: Global Implications

This dispute goes far beyond Getty Images. It’s part of a much larger conversation about how international companies are taxed in an increasingly interconnected world.

If the IRS sticks with its current stance, companies like Getty may face:

• Higher tax bills due to non-creditable foreign taxes

• Incentives to restructure licensing and IP ownership to minimize exposure

• Increased compliance burdens with even more complex tax planning

On the flip side, a win for Getty could encourage a more flexible and practical interpretation of royalty sourcing rules, potentially benefiting other U.S. multinationals with similar global operations.

What’s Next?

As of now, the IRS has not publicly responded to Getty’s recommendations. But with numerous other multinationals likely paying close attention, this case could influence future guidance and potentially set new precedents for IP-based income and foreign tax credits.

In a global economy where intellectual property drives enormous value, the way we tax cross-border royalties could become one of the defining issues of international tax law in the coming years.

Thoughts

Getty Images’ clash with the IRS is a prime example of the growing friction between national tax systems and global business models. While the legal details may seem technical, the broader question is one every multinational must consider: how do you manage IP royalties and tax obligations in a way that’s both efficient and compliant?

Stay tuned, because this is one legal battle that’s far from over—and its outcome could change the way international tax credits are handled for years to come.