Intellectual property rights in Luxembourg (IPR): tax exemption
The tax attractiveness of Luxembourg regarding the intellectual property has increased by the introduction of a tax optimisation regime for the use of intellectual property.
Article 50bis L.I.R. has provided for an 80% tax exemption of positive net income derived from the use or the right of using of certain intellectual property rights (copyright on software, patent, trademark, design or model and domain names) received by a Luxembourg tax payer, as well as capital gains realized on the transfer of such IP rights.
Article 50bis, §2 states that a Luxembourg tax payer using a self-developed patent in its business is also entitled to a deduction of 80% of the net consideration which a third party would have paid for licensing the patent based on market conditions.
CUMULATIVE CONDITIONS
- The IP rights must have been created or acquired after 31 December 2007.
- Obligation to activate any costs, amortizations or depreciations in connection with the IP rights during the first book year for which the application of this regime is demanded.
- The IP rights may not have been acquired from a legal person who is qualified as an "affiliated person", but may be acquired by a contribution in kind.
KEY ADVANTAGES OF THIS REGIME
- Broad scope of the IP rights.
- Flexibilty
- The IP can be developed by either the company itself or acquired from a third party
- The R&D center may be situated outside Luxembourg.
- Simplicity
The application of this regime is clear end provides with few conditions. - Tax perspective
- 80% of the income out of the IP rights will be exempted, which provides an effective tax burden of 5.7%.
- The losses are fully be deducted.
- The capital gains realized are also be exempted at 80%.
- Exemption of the wealth tax on the qualifying IP rights.
- This exemption regime may be cumulated with:
- The SOPARFI regime (providing an exemption on participations);
- The extensive network of double tax treaties concluded by Luxembourg;
- The European "Mother-Subsidiary" Directive (no withholding tax in case of dividends distributed) and "Interest-Roaylties" Directive (no withholding tax due on any interest or royalties paid between affiliated companies).
- The exemption is applicable as from the date of registration demands deposit of the IP rights.
- Special Valuation method for PME companies.
- The qualifying IP rights are 99% exempt from Net Wealth Tax.
Read more
- Company Law
- Fiscal laws - Corporations
- Soparfi
- Securitisation
- Specialised Investment Fund (SIF)
- EC Directives
- Tax Treaties
- Private Asset Management Company (SPF)
- Head office transfer
- Foundation
- Permanent establishment
- SICAV
- IP-Copyrights - royalties
- SICAR
- Real Estate Company
- Fiduciary Agreement
- Trust
- The European Company (SE)
- V.A.T.
- Tax consolidation
- Banking In Luxembourg
- E-Commerce - VAT
- The Residency status
- Resident saving
- Holding 1929
- Individual taxation
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