Are there any particular tax regimes applicable to intellectual property, such as patent box?
Tax (3rd edition)
Currently, only the canton of Nidwalden has introduced a special IP box regime. In practice, mixed companies (with an effective tax rate between 9 and 12%) are often used for the exploitation of IP in Switzerland. Holding companies (with an effective tax rate of 7.8%) may be used as well, if the exploitation of IP does not qualify as a business activity.
‘Tax Proposal 17’ (see 11 and 17 above) includes a patent box, mandatory for all cantons, as a replacement measure for the elimination of the various special taxation regimes.
No. However, the US tax system does subsidize certain research activities, for example, by offering a credit for qualified research expenditures and permitting research expenditure to be expensed rather than amortized over time.
In addition, although not strictly a “patent box” regime (due, in part, to the lack of nexus), the TCJA introduced section 250 of the Code, which provides a reduced rate of 13.125 percent on the foreign-derived intangible income (“FDII”) of a US corporation, which, as explained above in 13a, is achieved by a 37.5 percent deduction. For these purposes, FDII generally includes income from property sold, leased, or licensed by a US corporation to any non-US person for use outside of the US, as well as certain services a US corporation renders to non-US persons. It is anticipated that there may be challenges to FDII brought against the US in the World Trade Organization, as with similar export sales incentives previously provided by the Code. Thus whether FDII will be a long-term feature of the Code is open to question.
Canada does not have a patent box regime.
Canada does have a tax incentive program for scientific research & experimental development (SRED) performed in Canada. Under this program, a taxpayer carrying on business in Canada is permitted a current deduction for SRED expenditures that would otherwise not be deductible on the basis that they were capital expenses or were not incurred for the purpose of earning income from business or property. In addition, an investment tax credit is available for many types of SRED expenditures. Generally, a non-refundable tax credit equal to 15% of qualified SRED expenditures is available. For small Canadian-controlled private corporations, a refundable tax credit equal to 35% of qualified SRED expenditures is available. This can be an important source of government funding for early stage Canadian owned technology companies. Certain provinces have similar tax credit programs to encourage scientific research and development.
There is no patent box, but a premium of 14% applies to R&D expenses for R&D inhouse activities performed in Austria.
Conversely, intra-group interest and royalties are non-deductible if the foreign receiving company is subject to low taxes (i.e. less than 10%).
Capital gains from the sale of patents, patentable inventions and industrial manufacturing processes attached to those patents and patentable inventions, as well as licensing income related to such intangible assets, are taxed at a 15% CIT rate (effective tax is 17.1%).
However, the French patent box regime may be an issue in the context of BEPS Action 5. According to the 'nexus' approach chosen by the OECD, income derived from intangible assets may benefit from an IP regime only to the extent that it is generated by qualifying research and development expenditures. The French patent box regime was considered to be inconsistent with this approach. However, the French authorities consider that the patent box regime is not constitutive of a harmful practice and are not currently planning to change the regime.
In May 2012 Cyprus introduced a package of incentives and tax exemptions relating to investment in intellectual property rights, commonly known as an IP box. This combines the lowest rate of tax (effectively less than 2.5%) with the widest range of qualifying assets and the fewest restrictions compared to other countries’ IP boxes. Following the adoption of the modified nexus approach under action 5 of the G20/OECD base erosion and profit shifting project the IP box regime applies to a more limited range of assets than previously. Nevertheless, it continues to provide considerable tax savings, and companies that joined the scheme before June 2016 can look forward to benefiting from substantial savings until mid-2021.
Law 11.196/05 establishes certain tax incentives for companies that develop technological innovation within the Brazilian territory. The fiscal incentives available in view of the referred legislation are the following:
- Deduction for corporate income tax purposes (IRPJ and CSLL). of the costs incurred in relation to R&D activities (observe that taxable income is necessary for the company to be able to enjoy from this benefit);
- Federal VAT reduction on the acquisition of machines and equipment for R&D purposes;
- Accelerated depreciation of machines and equipment for R&D purposes in the year such goods are acquired;
- Accelerated amortization of intangible goods;
- Withholding income tax exemption on the remittances related to the registration and maintenance of trademarks, patents and plant varieties abroad.
In addition to that, the Federal government, by means of Provisional Measure 843/18, established fiscal incentives as of January, 201 for the automotive industry in order to (i) increase investments in research, development and innovation in the country, (ii) stimulate the development of new technology and innovation and (iii) automate the manufacturing process of new technologies and the increase of Brazilian company’s productivity in relation to mobility and logistics as well as to integrate the Brazilian automotive companies.
Among the most important benefits implemented, the new legislation allows companies to deduct from their corporate income tax (IRPJ and CSLL) due, an amount corresponding to 34% calculated over up to 30% of the expenditures incurred in the country with (i) research and development, (ii) training of suppliers, (iii) basic manufacturing, (iv) basic industrial technology and (v) technical support.
Germany does not operate any particular tax regime with respect to intellectual property. On the contrary, in 2017 Germany has implemented into its tax law a provision stipulating that royalties paid for intellectual property and other rights are not deductible in case the royalties paid are subject to a low tax preference regime unless qualifying as a patent box with the BEPS nexus approach.
With effect from 1 January 2016 Ireland has enacted a Knowledge Development Box (“KDB”) which is an OECD compliant, modified nexus patent box. The KDB provides for a 6.25% corporation tax rate on profits derived from intellectual property (including patents and copyrighted software) where the related research and development (“R&D”) has taken place in Ireland. The relief is diluted to the extent that the relevant R&D is undertaken by group companies or is based on acquired intellectual property.
Ireland also offers an R&D tax credit of 25% of the qualifying R&D expenditure taking place in Ireland. The tax credit may be used to offset the corporation tax liability of the company, pay income taxes of certain key individuals or may qualify for a cash refund in certain circumstances.
Yes. A recently enacted law that came into effect on January 1, 2017, introduced a new intellectual property regime (the “IP Regime”) in Israel applicable to technology and hi-tech companies that develop their intellectual property in Israel. Companies that qualify under the IP Regime would benefit from a reduced preferential corporate tax rate of a 12% on qualifying income (which rate is reduced to 7.5% in certain a specified development zone). In certain cases concerning multinationals (in general, where the turnover of the company is higher than NIS 1 billion), the applicable tax rate can be reduced to only 6%.
In order to be entitled to these benefits, the said law sets out certain convoluted conditions the purpose of which is to ensure that the benefits will be provided only when the intellectual property is actually developed in Israel.
There are specific tax incentives for principal hubs, pioneer statuses, investment tax allowances and special tax incentives such as that for research and technology initiatives, biotechnology industries (bionexus status incentives) and MSC Malaysia status incentives.
However, it is noted that the time of writing, in line with BEPS Action 5, Malaysia has identified and is presently reviewing several intellectual property regimes to assess if these regimes would lead to a harmful tax practice where there is ring-fencing, lack of transparency and no effective exchange of information.
No, there are no particular tax regimes applicable to intellectual property in Mexico.
There are no special intellectual property tax regimes in Norway.
There are no specific tax regimes for intellectual property.
There is no special tax regime specifically intended for intellectual property.
Portugal adopted in 2016 the international recommendations on intellectual property and patent box regimes deriving from BEPS Action 5 and thus amended the tax rules applicable to corporate income deriving from patents and other industrial property rights.
The regime provides for a 50% reduction of the qualifying taxable IP income. A limit was erected that is a function of the total costs incurred in developing the asset protected by the IP right.
In 2014 Italy has introduced a patent box regime, mostly based on international OECD standards. In essence the regime provides for a partial exclusion from taxation of the business income derived from certain qualifying intangible assets. Taxpayers may activate a ruling procedure with the tax authorities in order to agree in advance the criteria relevant to the application of the regime in their specific case.
There is no patent box but there are many incentives for R&D activities spanning corporate tax, income tax, customs tax, stamp tax and VAT.
No, we do not have a patent box regime or other regimes providing a preferential tax treatment for income and gains generated from intellectual property. That is, royalties and capital gains generated from intellectual property derived by a Japanese corporation are taxed in the same manner as ordinary business profits.
The Netherlands has an innovation box regime. Income that qualifies for the innovation box is effectively taxed at a reduced rate of 7% (instead of the regular rate, currently being 20%-25%).
As of 1 January 2017, the innovation box regime has been amended on a number of aspects. The key features of the innovation box regime are as follows:
- For small and medium-sized taxpayers (SMEs), the intangibles that qualify for the innovation box are self-developed intangible assets from R&D-activities for which so-called 'R&D wage tax certificates' have been obtained.
- With respect to taxpayers that are not SMEs, a cumulative condition applies for qualifying intangible assets. In addition to having obtained R&D wage tax certificates in respect of these intangible assets, a complementary legal ticket is required.
- A complementary legal ticket is a self-developed intangible asset:
a) for which a patent or plant breeder’s right has been obtained or has been applied for;
b) which qualifies as a software program;
c) for which an EU marketing authorization for medicinal products is granted;
d) for which "Octrooicentrum Nederland" has granted a supplementary protection certificate;
e) for which a registered 'utility model' has been granted;
f) for which the taxpayer is authorized to sell and use non-chemical pesticides;
g) which relates to intangible assets qualifying under a) through f); or
h) for which an exclusive license is granted to use an intangible asset qualifying under a) through e) in a certain way, in a certain geographical area, or for a certain period of time.
- The innovation box applies to benefits (including capital gains) derived from the qualifying intangible assets.
- There is no maximum to the amount of profits that can qualify for the reduced effective tax rate. However, the innovation box only applies to the extent that the profits exceed (i) the development costs of the qualifying intangible assets, and (ii) the losses that can be attributed to these assets, which have been deducted at the regular tax rate.
- The innovation box benefit will, in principle, be limited if a substantial part of the R&D activities is being outsourced to other group entities ('nexus approach').
- The application of the innovation box is usually discussed upfront with the Dutch tax authorities. The result of the discussions is subsequently laid down in a settlement agreement ('tax ruling').
R&D wage tax credit
The R&D wage tax credit is a tax benefit for (employment) costs and expenses which are directly related to Research & Development activities. Companies that have obtained a so-called R&D wage tax certificate (S&O-verklaring), are allowed to pay less wage tax and receive a rebate on part of their employment costs. A R&D wage tax certificate is only granted for specific R&D-activities. The R&D rebate amounts to 32% of the R&D cost base up to € 350,000 (40% for start-ups). To the extent that the R&D cost base exceeds this threshold, the R&D rebate amounts to 16%. The R&D cost base consists of the R&D employment costs and R&D costs and expenses. (rates and thresholds for 2018)
No special tax regimes, except for the R&D incentives as mentioned above.
No, there are no such regimes.
The Patent Box enables UK companies to apply a lower rate of 10% corporation tax to profits earned after 1 April 2013 from its patented inventions. The patent box regime was designed to attract companies with intellectual property overseas to choose the UK as a jurisdiction in which to develop the asset. Following OECD concerns that Patent Box was open to abuse, the UK government committed to making changes to the regime. In particular, it is no longer possible to use the standard method of calculating the percentage of taxable profits that could benefit from the regime. Instead, only profits derived from research and development activities carried out by the company will be allowed in a claim.
In addition to the Patent Box, the UK also gives tax relief in the form of Research & Development Tax Relief for projects that advance overall capability or knowledge in a technological or scientific area (note: this is not just increasing the company’s knowledge). There are two schemes, one for SMEs – up to 500 employees, up to €100m turnover and up to €86m balance sheet – which gives tax relief at 230% of the R&D costs and one for Large Businesses, those that are not SMEs, which gives relief at 130%.