Answer ... Some intangibles can be amortised.
At the option of the corporate entity, research and development expenses relating to intangibles can be immediately deducted or can be added to the intangible cost price and amortised.
Patents can be amortised on a straight-line basis over a minimum period of five years, provided that the same depreciation accounting is retained.
Development costs and software development costs must be amortised on a straight-line basis over a maximum period of five years.
The amortisation of goodwill is not allowed.
A new taxation regime for income generated from industrial property and software has been adopted as from 1 January 2019. Under the IP Box regime, income received as consideration for the use (licences or sub-licences) of patents and similar assets (mainly inventions for which patentability has been certified by the competent authority, industrial manufacturing processes and copyrighted software), and capital gains derived from the sale of patents and similar assets, may be taxed at a 10% corporate tax rate under certain conditions.
The taxpayer can opt for taxation either by type of intangible assets or by family of products or services.
The net income base that is subject to the 10% rate will take into account the research costs and a percentage determined from the ‘nexus’ approach (ie, the ratio between the qualified costs and the total costs, including the purchase cost).
In order for a significant proportion of IP income to qualify for tax benefits, a significant proportion of the actual research and development (R&D) activities must have been undertaken by the qualifying taxpayer. Hence, this approach limits the application of the IP Box regime if R&D is outsourced to related parties.
As part of the first year of the option, a ‘capture’ mechanism is available to take into account previously incurred research costs, the amount of which will vary depending on the option date. This new regime will also apply within tax consolidated groups.
In order to opt for the preferential tax regime, detailed documentation must be provided to the French Tax Administration on the first day of any tax audit; otherwise, a penalty corresponding to 5% of the income generated from the non-documented, intangible asset may be applied.
If they are not eligible for the new IP Box regime or if the corporate entity does not opt for this regime, capital gains resulting from intangible transfers are subject to corporate tax at a standard rate (31% or 33.33% for 2019 and 28% for 2020).