Administrative guidance on Luxembourg’s IP tax regime


In brief

On 28 June 2019, the Luxembourg tax authorities published an administrative circular (the “Circular”) on the application of article 50ter of the Luxembourg income tax law (“LITL”).

The new IP regime of article 50ter, fully compliant with the OECD’s “nexus approach”, took effect from the 2018 tax year. As a reminder, the previous article 50bis LITL IP regime was closed to new entrant IP with effect from 30 June 2016, although previously qualifying IP can continue to benefit from the old regime during its “sunset” period, running until 30 June 2021.

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In detail

The Circular neither amends nor supplements the text of article 50ter. It does however provide explanations and clarifications on a number of items, including the following topics:

  • more details on eligibility of assets, including a high level description of the Luxembourg and international protection rules and procedures applicable to such eligible IP,
  • the R&D activities to be taken into account for the application of the regime,
  • the definition and computation of eligible expenditures, including cases where R&D activities are performed in a EEA branch of the Luxembourg taxpayer
  • the date of recognition of IP rights, and the date for applicability of the regime,
  • the scope and determination of acquisition costs,
  • the total expenditures taken into account for the computation of the nexus ratio,
  • the scope of eligible income, and the determination of adjusted eligible income and compensated eligible income,
  • the application of the regime in the event of a migration to Luxembourg, or where IP transfers occur in the context of a tax neutral reorganisation,
  • interactions between the old and the new IP regimes,
  • interaction with foreign tax credits,
  • documents and evidence to be kept by the taxpayer.

The Circular also reconfirms the net wealth tax rules applicable to eligible assets. 

In conclusion

The Circular provides helpful and welcome guidance on a number of aspects of the application of Luxembourg’s post 2017 tax regime for intellectual property.

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