Luxembourg Introduces New Patent Box Regime | KPMG | CA
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Luxembourg Introduces New Patent Box Regime

Luxembourg Introduces New Patent Box Regime

Luxembourg is introducing a new patent box regime for 2018.


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On April 26, 2017, Luxembourg announced its plan for a new intellectual property (IP) regime. The regime will reinforce research and development (R&D) activities inside the country and encourage foreign investors to consider R&D spending in Luxembourg. This IP regime is in line with the new international tax standards set by the EU and OECD (in particular, BEPS Action 5).

No further details have currently been released.

In general, under a patent box regime, a business may receive a concessional rate from a country on qualified IP income. The concessional rate comes at the back-end of the innovation value chain and because of this, there can be concerns regarding whether there is sufficient business activity surrounding what might be a transfer of IP to a Patent Box country to warrant the concession.

BEPS Action 5 addresses this by recommending that countries adopt a "nexus approach". This approach would link benefits under preferential IP regimes to the taxpayer's qualifying R&D expenditures that gave rise to the IP income. For this purpose, the cost of acquiring IP would not be regarded as a qualifying expenditure. Taxpayers would need to track expenditures, IP assets and income to support the claim that qualifying income can be traced to qualifying expenditures.

According to the OECD Luxembourg's previous patent box regime was inconsistent with the nexus approach, and it was repealed July 1, 2016.

For more information, contact your KPMG adviser.

Information is current to May 16, 2017. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's National Tax Centre at 416.777.8500.

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