New taxation regime for the revenue of some intellectual property rights

Article 50bis of amended Income Tax Law, Law of 21 December 2007 – Entry into force 1 January 2008
Executive Circular letter LIR n°50bis/1 of 5 March 2009 relating to the partial exemption of the income derived from some intellectual property rights

Eligible IP rights

• Copyrights on software which are original works based on an intellectual invention of their author. The original character is based on the source-code. The proof regarding the existence of the software and the date of creation is established by any means, the « i-dépôt » at the BeNeLux Office for Intellectual Property is for e.g. a mean of proof.
• Patents which grant an exclusive right on a technical/industrial invention to an investor for a limited period of time. Qualifying patents must be protected, and thus registered with a State or a Supranational Body. The patent is qualifying for the new regime as from the date the patent is requested.
• Trademarks, designs and models (including products and services) which are registered. A trademark is a sign that distinguishes certain goods or services from those of the competitors.
• Domain names which are registered.

Qualifying conditions

• These IP rights must be acquired or created after 31 December 2007
• IP rights must be acquired from a person which is not considered as an "affiliated company" (indirect holding through a transparent entity is seen as directs shareholding):

• Acquirer (parent Company) which holds at least 10% of the selling entity (subsidiary);
• Seller (parent Company) which holds at least 10% of the acquirer (subsidiary);
• At least 10% of the share capital of the seller and acquirer are held by a third Company.

• IP rights acquired from an individual person e.g. the shareholder of the IP management company is qualifying.
• The new regime applies to the entity which has the economical ownership of the IP rights, regardless of the entity/person in the name of whom the IP right sis registered/recognized.

Tax regime

The net profit derived from the remuneration of the use or the licensing of these IP rights is exempt from corporate income tax up to 80% and is exempt from net wealth tax.

The net profit is considered as being the gross revenue reduced by all expenses economically linked to the revenue (including the depreciation charge of the IP rights)

Effective tax rates

Corporate income tax and municipal business tax (28,59%) => effective rate = 5,718%

Net wealth tax: 0.5% of the net asset value of the company as at 1st January => full exemption for the qualifying IP rights.

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