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Intellectual Property

One of the most attractive frameworks for Intellectual Property Right management in Europe

The Luxembourg tax regime aims at encouraging Intellectual Property (IP) companies to invest in intellectual property and research and development (R&D) through an effective tax rate on IP income of below 6%. The attractive IP tax regime available for a Luxembourg IP companies is applicable to following IP rights:

  • patents

  • trademarks

  • models

  • design

  • authors’ copyright related to software

  • internet domain names (www.)

These assets should have been acquired or created after 31 December 2007. There is no minimum holding period.


Creatrust, for trust, communication and confidence

Creatrust can provide you with guidance and knowledge to help you take full advantage of the favourable legal, taxation and regulatory frameworks available in the Grand Duchy.

Our specialists draw on in-depth, in-house knowhow to help you ensure that your intellectual property, and all circumstances, are fully considered and thereby structured to your best advantage.

We can, for example, help you identify the key IP issues in your business, company or group; provide guidance on appropriate legal and tax structuring; inform you of all relevant licensing, cost-sharing and research and development variables; while also providing tried and tested advice on IP flows, financing, transfer pricing, and more.

In addition to offering advisory services, Creatrust provides corporate services for clients; from the creation of an IP company, fund or start-up established in Luxembourg to the administration and management of the structure. To request a brochure, click on the button on the right-hand side of this page.

 

The Intellectual Property Right tax regime : (Article 50bis Luxembourg Tax Code)

  • Exemption of 80% of the net profit derived from the royalties received by the Luxembourg IP company on its IP rights;

  • Exemption of 80% of the net capital gain realised upon disposal of these IP rights by the Luxembourg IP company;

  • 100% exemption from wealth tax on the IP rights value held by the Luxembourg IP company;

  • If the Luxembourg IP company has developed the IP rights itself, then it allows a deduction equal to 80% of a deemed income of the IP Rights used by the Luxembourg IP company.

 

The Luxembourg IP company

The IP company can be set up in any form existing under Luxembourg company law. Investors, promoters, authors and IP developers often choose the S.à r.l or the S.A. (with a minimum capital of 12,500 or 31,000 Euro).

The IP rights may be purchased or acquired by a contribution in kind from the company's shareholder.

There is no restriction on the nationality, residence or domicile status of the shareholder in a Luxembourg IP company. They may be a corporate or private individual.

 

 Luxembourg Intellectual Property company


Incentives offered by Luxembourg as one of the most attractive frameworks for R&D in Europe

As well as the specific IP tax exemptions noted above, Luxembourg IP companies, private research SPVs, R&D companies, and Funds, etc., also benefit from a range of incentives including R&D project funding of 25% to 100% (generally being subsidies or interest-rate subsidies).

Luxembourg is therefore ideally located in the heart of Europe for the incorporation of Intellectual Property Rights’ companies.

 

 

A new IP regime to comply with the Nexus Approach will be soon available in Luxembourg

To require substantial activities in the context of IP regimes, governments reached a consensus on the “Nexus Approach”, which allows a taxpayer to benefit from an IP regime only to the extent that the taxpayer itself incurred qualifying research and development (“R&D”) expenditures that gave rise to the IP income.

Therefore,  the Organisation for Economic Cooperation and Development (the “OECD”) released a document on 6 February 2015 (“Action 5: agreement on Modified Nexus Approach for IP Regimes”) describing amendments elaborated in comparison  to the initial Nexus Approach.This document has been endorsed by all OECD and G20 countries. As a first step, according to the Budget law, the existing IP regime will be repealed as from 1 July 2016.

 

However, it also contains a grandfathering rule by which taxpayers benefiting from the current regime are allowed to keep such benefits during a transition period beginning on 1 July 2016 and ending on 30 June 2021. New entrants could be admitted to the existing regime until 30 June 2016.

In order to be consistent with the OECD guidelines, this grandfathering rule provides two safeguards:

  • benefit of the transitional period would be shortened to 31 December 2016 for IP rights acquired from related parties after 31 December 2015 unless the IP rights were already benefitting from the Luxembourg IP regime or a foreign IP tax regime corresponding to the Luxembourg regime at the date of the acquisition,

  • requirement of a spontaneous exchange of information by the Luxembourg Tax Authorities on the identity of taxpayers benefiting from the existing regime since 6 February 2015.

 

IP Company: Case Studies


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