The Future Of The IP Box Regime: UK And Germany’s Joint Statement

 It is no secret that the favourable tax treatment of IP-generated income (generally known as the IP Box regime), was designed to stimulate hi-tech innovation across the EU. In the recent years, certain G20 countries, perhaps with particular reference to Germany, were unhappy with the number of IP Box regimes developed in the EU, notably extending the favourable tax treatment (in essence lower effective corporation tax) to any IP-generated income as opposed to simply Patent-related income.

It is important to note the following proposals by the UK and Germany, revealed at the latest G20 summit:

  • The present UK Patent Box will be closed to new entrants in June 2016 and abolished by June 2021. The implication is that a new, reformed UK Patent Box will be in place by June 2016 at the latest, based on the OECD's 'Modified Nexus Approach'. This will only offer tax incentives where significant R&D is undertaken in the UK.
  • Companies already within the UK Patent Box can hold on to the current benefits until June 2021.
  • There will be restrictions on qualifying expenditure for the UK Patent Box where R&D work is not undertaken by the claimant.
  • By June 2015 the OECD will provide guidelines on how to track and trace expenditure for Patent Box calculations.
Intellectual Property Regime Cyprus - CA Advocates

UK tax practitioners focus on the following positive outcomes from this joint statement:

  • Replacing the uncertainty of the future of the UK Patent Box regime, it is now clear that the regime will continue to apply albeit in a modified format.
  • Companies already accessing the UK Patent Box will be able to continue utilizing it for several years and plan ahead for the changes.
  • Further challenges of this regime by Germany are very unlikely while UK continues being committed to the BEPS project..
  • There has been no indication that the 10% rate of tax on profits derived from patents will change; just a narrowing of eligible expenditure. Accordingly, there is still incentive to plan in such way as to take advantage of the low rate of income tax.

In conclusion, now appears to be the right time for companies investing in innovation and technology to explore their tax incentives in structuring through the UK Patent Box or any other Cyprus IP Box Regime

Comments

Post a Comment

Popular posts from this blog

Cyprus: Changes To IP Box Scheme Proposed

Image
  Corporate Tax, Cyprus Introduction Transitional arrangements New arrangements Comment Introduction Parliament recently amended the Income Tax Law to bring its provisions on the taxation of income from the use or sale of intangible assets into line with the 'modified nexus' approach. This approach was agreed by G20 leaders towards the end of 2014 and adopted by the Organisation for Economic Cooperation and Development and the European Union. It allows a taxpayer to benefit from an IP taxation regime (commonly known as an 'IP box') to the extent that it can show material relevant activity, including a clear connection between the rights which create the IP income and the activity which contributes to that income. Countries whose IP regimes were incompatible with the modified nexus approach were required to amend them and to allow no new entrants to non-compliant IP regimes after June 30 2016. However, transitional arrangements allowing taxpayers benefiting from existing
Read more

Cyprus: Recent Developments In The Cyprus Intellectual Property Tax Field: Are You Prepared For 30 June 2016 And 31 December 2016?

Image
  If you already own an  Cyprus IP Box Regime , or if engaging to one is of your interest, recent international developments at G20 / OECD /  EU level, and the Cyprus Ministry of Finance [MoF] 30th December 2015 announcement, require your special attention.  As per this announcement, amendments to the current Cyprus Intellectual Property tax regime will be promoted, so that a new IP tax regime is introduced as from 1st July 2016.  These changes will incorporate the recommendations of Action 5 of the Organisation for Economic Co-operation and Development [OECD], which were issued on October 5th 2015 for the Action Plan against 'Base Erosion and Profit Shifting' [BEPS] , together with the Conclusions of the ECOFIN Council adopted on December 8th 2015. Further, the OECD's Action 5 report has been endorsed by the G20 and OECD countries. Additionally, it has also been endorsed by Council of the European Union which in December 2015 invited the EU's Code of Conduct Group [ Bu
Read more