Intellectual Property & IP Tax Regime Luxembourg | Olistone

Intellectual Property & R&D in Luxembourg

In today's knowledge-based economy, a major share of a company's value rests upon its intangible assets. Luxembourg provides one of the most competitive frameworks in Europe for the protection and commercialization of intellectual property (IP).

The Grand Duchy has established an ecosystem tailored to encourage businesses to invest in research and development (R&D). With an effective tax rate on eligible IP income hovering around **5%**, the Luxembourg regime stands as a major growth lever for tech startups, international groups, and software developers. This national strategy aims not only at tax optimization but also at ensuring legal security and enhancing the commercial value of innovations on a global stage.

1. The IP Tax Regime (Art. 50bis & 50ter)

The Luxembourg tax framework relies on robust incentives embedded within the Income Tax Law (LIR). The objective is straightforward: lower the tax burden on revenues derived from innovation so that these funds can be reinvested into new R&D projects.

Key Advantages of the Regime:

  • 80% exemption of net income derived from royalties received by the Luxembourg IP company.
  • 80% exemption of the net capital gains realized upon the disposal of intellectual property rights.
  • 100% exemption from the Net Wealth Tax on the value of the held IP rights.
  • Notional deduction: If the company develops its own rights, it can deduct 80% of a deemed income related to the internal usage of those rights.

2. Eligible Rights and Assets

The attractive regime available to Luxembourg companies applies to a wide range of rights, provided they were acquired or created after **December 31, 2007**. It is important to note that no minimum holding period is required to benefit from these advantages.

Patents & Inventions

Protection of technical innovations and industrial processes, crucial for the biotech, manufacturing, and MedTech sectors.

Software & Copyright

Copyright linked to software is a core pillar of the current regime, drawing SaaS publishers and FinTech players alike.

Trademarks & Designs

Included in the historical framework, models, designs, and commercial trademarks protect the identity and goodwill of the business.

Under the newer regime (Art. 50ter), a particular emphasis is placed on **patents** and **copyrighted software**, strengthening the technological focus of the country.

3. The Nexus Approach (OECD Compliance)

To align with international standards combatting base erosion and profit shifting (BEPS), Luxembourg adopted the **modified Nexus Approach** (OECD Action 5).
Article 50ter allows companies to benefit from the 80% exemption provided that the taxpayer has itself incurred the R&D expenditures that gave rise to the IP income.
This approach establishes a direct link between the tax benefit and real economic activity within Luxembourg. It favors structures that maintain genuine operational substance and local research facilities, ensuring the long-term viability of the setup against international audits.

4. Structuring an IP Company (IP Co)

Luxembourg provides complete flexibility regarding the legal structure of an IP entity. Investors and promoters generally prefer the **S.à r.l.** (min. capital €12,000) or the **S.A.** (min. capital €30,000).

Flexibility and Accessibility:

  • Acquisition of rights: IP can be purchased or contributed in kind by the shareholder upon incorporation.
  • Shareholding: No restrictions apply to the nationality or residency of shareholders (whether individuals or corporate entities).
  • R&D Incentives: Beyond tax advantages, the country offers R&D project financing that can cover anywhere from 25% to 100% of costs through grants or interest subsidies.

5. Strategic Services and Support

Managing an intellectual property portfolio requires a multidimensional vision encompassing legal, tax, and commercial aspects. At **Olistone**, we assist our clients in identifying key IP opportunities and challenges within their corporate group.

Portfolio Management

Filing, renewal, and monitoring of trademarks and patents on a global scale to prevent any infringement.

Audit & Strategy

IP analysis to evaluate the value of intangible assets and guidance on licensing and cost-sharing agreements.

Commercialization

Negotiation of disposals, licenses, and coexistence agreements to maximize revenues generated by your intellectual property.

Christophe De Oliveira
Luxembourg

Christophe De Oliveira

Managing Partner | CPA | IP Structuring Expert