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New IP regime to be introduced in 2018
Taxand Luxembourg looks at the new IP regime to be introduced in 2018.
On 4 August 2017, the text of the draft law introducing the new Luxembourg BEPS-compliant Intellectual Property (IP) regime was released. As from 1 January 2018, Luxembourg taxpayers will be able to benefit, under certain conditions, from an 80% exemption regime applicable to income related to patents and copyrighted software. In addition, IP assets which qualify for the 80% (corporate) income tax exemption will be fully exempt from net wealth tax.
The new regime will replace the former IP regime which had to be repealed as of 30 June 2016 since it was, as many other IP regimes, not in line with the so-called “modified nexus approach” defined in the OECD report on Action 5 of the BEPS Action plan and agreed upon at EU level.
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The introduction of a new IP regime will be positive for both Luxembourg taxpayers and for Luxembourg itself as the regime should attract new R&D activity to Luxembourg and strengthen existing IP management and development activities. IP regimes in countries participating in the BEPS project will become more and more similar in the future given that they will all have to comply with the modified nexus approach. Therefore, it was important that Luxembourg make the right choices and exhaust all options provided in the BEPS report: the Luxembourg legislator decided to adopt the optional 30% up-lift on qualifying expenses, which is good news for Luxembourg taxpayers.