Taxation Of Income And Gains From IP Rights

In its answer to a parliamentary question on patent boxes (QP 896), Luxembourg Finance Minister announced that a new IP tax regime in line with the so‑called "modified nexus approach" will be introduced. A consensus has been reached at OECD level on the modified nexus approach in early 2015 and is expected to create a level-playing field in the area of IP taxation.

Under the modified nexus approach, the emphasis is on the substantial activity requirement. Income and gains from eligible IP rights may benefit from a favourable tax treatment only in proportion of the R&D expenditures supported by the taxpayer compared to overall expenditures incurred in the development of the asset (including most notably IP acquisition cost and outsourcing R&D costs). A 30% up-lift of qualifying expenditures is permitted subject to conditions.

Eligible IP rights will include patents and functionally equivalent IP rights but not...