Intellectual property rights in Luxembourg (IPR): tax exemption

Me Beatriz Garcia

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.
Since 1stJanuary 2008, the Luxembourg Government introduced an attractive measure for companies granting or using copyrights linked to software, licences, patents, designs or models.
Therefore the Government confirms its intention to make the country attractive for companies wishing to invest in copyrights and development in Research & Innovation. It's important to note that this measureis available for all the companies, without differentiation based on their origin, nationality, type, shareholding, holding, structure, size....
Article 50bis L.I.R. (law on income tax) 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.

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