On 22 March 2018 the Luxembourg Parliament (Chambre des députés) adopted the new IP Box Law. The main features of the new IP Box may be summarised as follows:
- The New IP Box is BEPS compliant and follows the OECD's new nexus approach (BEPS Action 5)
- It offers an 80% exemption from corporate income tax and municipal business tax on the net income derived from eligible IP assets, leading to an effective tax rate of 5.202% (in Luxembourg City)
- It offers a 100% exemption from net worth tax on eligible IP assets
- Eligible IP assets includes inter alia patents and software protected by copyrights but also various forms of medicinal product rights
- The new IP Box is another opportunity in the Luxembourg toolbox. It is applicable with retroactive effect for the fiscal year closing 2018 and taxpayers may make use of the regime as of today. Taxpayers who still benefit from the grandfathering provisions under the former IP Box regime can either opt to continue to use the old rules or transition to the new tax regime as of the current fiscal year.
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