New Luxembourg IP regime

On 4 August the Luxembourg government released Bill of Law 7163 for a new intellectual property ("IP") tax regime, which shall take effect in the tax year 2018.

Since 2008, Luxembourg has offered a tax incentive consisting of an 80% exemption from corporate income tax for qualifying income and capital gains derived from certain types of intellectual property assets. Moreover, from 1 January 2009, a 100% exemption from net wealth tax ("NWT") had been applied to qualifying IP rights.

Following agreement on a modified nexus approach for IP regimes at both OECD and EU level, Luxembourg decided to abolish its IP box regime as of 1 July 2016 (with a grandfathering period of five years).

As was the case in the previous regime, under the new regime, eligible income from qualifying IP assets will benefit from an 80% exemption from Luxembourg income tax, resulting in an effective tax rate of approximately 5.2%, and a full exemption from Luxembourg NWT.

For further insight on the key features brought by this Bill of law, see the article “New Luxembourg IP regime” on our website.