I.P.R. - Intellectual Property Rights
Introduction
As we have already seen, set up a company in Luxembourg has many advantages such as:
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A corporate tax rate among the lowest in Europe;
Flexibility on deductible expenses;
Moderate and advantageous social contributions for high incomes;
Many tax exemption opportunities on securities income;
But in an extremely difficult economic climate like the current period, it is important to try to go further in the optimization opportunities. Therefore, we will now focus on the possibility of tax exemption on income from intellectual property rights.
Type of properties covered by the Intellectual Property Rights
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Copyright (software only)
Patents
Designs
The name or trademark
Domain names
Excludes: other copyrights, plans, expertise, form and image rights.
Partial tax exemption: Art. 50 bis L.I.R.
Article 50bis LIR, introduced to the law of 21/12/2007 published in Memorial A under No. 234, introduced a system that allows a taxpayer or a corporation resident in Luxembourg to exempt 80% of net positive revenues from the use, operation, temporary alienation of IPRs possessed by these residents.
In addition, the art.3, No. 1 of the Law of 19 December 2008 complete this exemption regime and specifies that IP revenues are not part of the operating assets and are therefore exempt from tax on capital.
Consult 50bis LIR on the administration site
Conditions for exemption
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Rights created or acquired after 31/12/2007
Recognition in these assets (activation of expenses)
Rights not acquired by associated company [see definition]
Eligible taxpayer
Application of VAT on royalties
Acquisition: Definition
The entity who acquires the intellectual property rights must not have the quality of a related company. This means that the company must NOT be found in any of the following situation with respect to its subsidiaries or sister companies:
The intellectual property rights are acquired from a company that directly or indirectly holds at least 10% of its own share capital (subsidiary) or
The intellectual property rights are acquired from a company in which it holds directly at least 10% of share capital (parent company), or
A third company owns 10% of the share capital of both stakeholders (sister companies);
Possibility of exploitation
The incomes covered by the exemption may come from:
- Direct exploitation of these rights by the right holder
- By the sale to a third party
- By the granting of licenses (exclusive or not) by one or optionally several other persons or companies (fees, royalties).
Generally, only the incomes generated during the marketing of eligible intangibles are likely to benefit from this exemption.