IP Luxembourg tax regime Comparison with the Belgium, Dutch and Irish tax regime

In the frame of maximizing the exploitation and management of eligible intellectual properties (i.e. “IP”), companies and individuals holding such intangible assets show increasing interest in favorable IP tax regimes that several European countries have enforced in their own jurisdiction.

The purpose of this newsletter is to provide with a high level comparison of the IP tax regime in place in Luxembourg, Belgium, Netherlands and Ireland.

The eligible IP rights are the following:

Luxembourg

Patents and self-developed patents, trademarks, design and models, (software) copyrights, domain names.

Belgium

Limited to patents and extended patent certificates (i.e. improvement to existing patents)

The Netherlands

Limited to self-developed patents, intellectual property from innovation (patented or R&D certificate) and pant breeders’ rights

Ireland

Patents, registered designs, trademarks and brand names, copyrights and publishing titles, domain names, know-how, service marks, products of designs, formulas, processes or inventions

Based on the above, Ireland has the widest scope of eligible IP rights, closely followed by Luxembourg. The main difference between Ireland and Luxembourg in terms of eligible IP is that Ireland’s IP regime includes know-how and formulas that do not need to be registered. It is worth mentioning that the patent income exemption is no longer available in Ireland but the IP still continue to benefit from tax incentives by way of tax credit or deduction for certain expenditure.

Please find below a high level summary of the main characteristics of the IP tax regimes of the above-mentioned countries, with the exception of Ireland, where the patent income exemption is no longer available.

Countries Legal ownership required Qualifying income Basis of reduction Effective tax rate
Luxembourg No IP income and capital gain 80% exemption on net IP income and capital gain 5.76%
Belgium Yes IP income but capital gain excluded Deduction of 80% on the gross qualifying IP income 6.8%
Netherlands Yes IP income and capital gain N/A 5%

As highlighted in the above chart, Luxembourg has competitive arguments to become and be the future “IP Hub” in Europe and even on a worldwide basis.

Luxembourg, March 2012

 

 

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