Intellectual property activities also benefit from an advantageous tax regime. In addition to the low VAT rates and the absence of withholding tax on royalties, a specific income tax treatment was introduced in 2008 to expand IP management activities in Luxembourg.

Indeed, income from intellectual property may benefit from an exemption of 80% of the IP-related income (or of deemed IP-income if a taxpayer creates IP for his own use). The regime is subject to three conditions contained in Article 50bis, §§4-5 LIR (Law on Income Tax):

  • The IP must have been acquired (or created) after 31 December 2007.
  • Expenses in direct economic connection with the IP must be recorded as an asset in the balance sheet during the first year for which the benefit of this tax regime is claimed.
  • The IP may not have been acquired from a person that is assimilated to an “affiliated company”.

Moreover, on January 1st 2009, net wealth tax of 0.5% was abolished on qualifying IP.

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