Intellectual Property

In today's competitive business environment managing efficiently its Intellectual Property ("IP") is more important than ever. For this purpose, choosing the right location and the right business model for developing and/ or holding an IP portfolio is a key factor.

Intangibles such as patents/ know-how/ workforce, customer relationships and unique organisational designs accounted for some three-quarters of the Fortune 500’s total market capitalization in the late 1990s. According to Leonard Nakamura, a US Federal Reserve economist, they absorb USD 1 trillion of investment funds every year – roughly the same as total corporate investment in physical assets. The reasons are easy to grasp, as numerous recent publications show that IP investment often offers the "keys to the kingdom" of the stakeholder wealth.

Situated at the heart of Europe. Luxembourg has long a established reputation as a favoured location for a wide range of international companies with diverse business models from a variety of sectors and offers one of the most attractive frameworks for R&D and Intellectual Property in Europe, including a new intellectual property regime setting up a system of partial exemption on the income and capital gains derived from the use and the right to use certain intellectual property rights.

The new tax regime aims at encouraging investments in intellectual property and R&D by allowing currently 5.7% effective tax rate on IP income and offering attractive R&D incentives.

The Luxembourg IP opportunities

IP rights qualifying for the benefits of the IP tax regime:

The favorable IP regime is applicable to IP rights (patents, trademarks, design, models, copyright related to software and domain names) acquired or created after 31 December 2007.

The main benefits of the IP tax regime are the following:

  • Exemption of 80% of the net positive income from the use or the right to use certain IP rights;
  • Notional deduction equal to 80% of a deemed net income applicable for self-developed patents used by the taxpayer in its own activity;
  • Exemption of 80% of the net capital gain realised upon disposal of qualifying IP;
  • 100% exemption from net wealth tax on qualifying IP rights

And more - in Luxembourg your company could benefit from:

  • Flexible valuation rules for small and medium size enterprises
  • No exit tax constraints
  • Advantageous tax treatment of the R&D expenses, availability of incentives (capital subsidies, interest subsidies, promotion aids, tax relief, state guarantees, real estate incentives
  • Infrastructure support in IP management, seed funding, logistics and industry collaborations
  • Long established competitive holding location
  • Stable and least risky location
  • Business driven environment

A commitment towards R&D and Innovation

Luxembourg offers one of the most attractive frameworks for R&D in Europe.

Apart from the specific IP exemption regime, companies, private research organisations or public organisations can therefore benefit, amongst others, from incentives ranging from 25% to 100% (generally subsidies or interest-rate subsidies) to finance an R&D project.

Managing in a downturn

Tough economic times serve to force companies to improve efficiency, creating enterprises that are fit, lean and ready to compete, part of which represents optimisation of R&D and IP functions. Every business is facing new challenges that must be addressed. At the same time, the market conditions provide a unique opportunity to revitalise a business.

What we can do for you

PwC can assist you with:

  • A multi-competency approach in setting up efficient IP holding and management structures in Luxembourg, including optimization of R&D functions
  • A high-level diagnostic of a group’s IP policies
  • IP planning
  • Analysis of tax efficient IP rights exploitation schemes and principal structures
  • Valuation of intangible assets
  • Royalty benchmarking analysis
  • Value chain transformation projects
  • Assistance in availing R&D incentives