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Luxembourg Intellectual Property

On 01 January 2008, Luxembourg’s Government introduced a measure seeking to exempt 80% of revenues derived from intellectual property as well as capital gains obtained through the sale of intellectual property.
By introducing this regime for the partial exemption of intellectual-property revenues, Luxembourg’s Government sought both to foster research activities within Luxembourg and to increase Luxembourg’s attractiveness for the establishment of companies holding and managing intellectual property.

The exemption applies to revenues paid to a Luxembourg company in return for the use of any software, copyright, patent, trade mark, design or model.
Most capital gains on transactions relating to intellectual property are exempt up to 80%.
Unlike companies based in offshore States, a Luxembourg company benefits from a reduction in tax withholdings for revenues received from abroad, through the EU directive which applies to the payment of royalty or through tax treaties meant to avoid double taxation.
This regime is compatible with Luxembourg’s obligations regarding European Union regulations.

Presentation of the tax regime:
Article 50bis of the Income-Tax Law (Loi concernant l’impôt sur le revenu, LIR), can be summarised as follows:
Article 50a introduces an exemption regime for revenues derived from the assignment or sale of intellectual property. Intellectual property acquired from a third party includes patents, computer software, trademarks, brand names and models.
The regime is subject to three conditions:
The intellectual property must have been acquired (or created, if applicable) after December 31, 2007.
Expenses with a direct economic relation to the intellectual property must be booked as assets in the accounting records for the first year in which the benefits of this tax regime are applied for.
The intellectual property may not have been acquired from a person akin to a “related party”.
Company “A” is deemed a related party of Company “B”, under the Law, if:
“A” directly holds at least a 10% stake in “B”;
“B” directly holds at least a 10% stake in “A”;
A third company holds at least a 10% stake in both “A” and “B”.

Income derived from intellectual property:
Under Article 50a, 80% of all net revenues received by a Luxembourg company in consideration for the use of a copyright on software, patents, trademarks, designs or models are exempted.
Net revenues are defined as the gross royalties received by the company, minus those expenses with a direct economic relation to the revenues, including depreciation and annual reserves.

Capital gains from the sale of intellectual property:
Capital gains obtained from the sale of intellectual property enjoy an 80% exemption. Profits remains taxable for an amount equal to the expenses with a direct economic relation to the revenues, including any depreciation and reserves which may have reduced the taxpayer’s tax base for the fiscal year of the sale or for all fiscal years prior to the sale.
It bears stressing that the relation between this new measure and the current Parent-Subsidiary regime allows Luxembourg to offer integrated, optimised solutions to companies holding or managing intellectual properties.
Combined with the other economic benefits of Luxembourg’s economy, the SPF and SOPARFI, this new intellectual-property regime helps make Luxembourg even more attractive for holding companies.
Appended hereto, you will find an example of tax calculations.

Do not hesitate to contact us for further information on the Luxembourg intellectual property.


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Abroad fiduciaire is a member of the Order of Chartered Accountants of Luxembourg