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Luxembourg is becoming the European hub for IP
Why incorporating a Luxembourg Company could help you to stay ahead in 2011
Luxembourg is becoming the European hub for IP
IP in Luxembourg, the Tax Benefits
Since 21 December 2007, the new Luxembourg IP regime has caused a stir amongst other EU nations. The 80% tax exemption on income derived from intellectual property as well as the capital gains resulting from the disposal of IP, has resulted in Luxembourg becoming an extremely attractive destination for IP.
The definition of IP in Luxembourg acquired from third parties is broad; including patents, copyrights on software, trademarks, designs and models unlike the Belgian jurisdiction which is far more restrictive.
The taxation benefits are considerable as only 20% from the net income out of IP will be taxed at 28,59% which provides an effective tax burden of roughly 5.17%.
The amendments introduced on the 19th of December 2008, have resulted in qualifying IP assets held by Luxembourg companies being exempt from the net wealth tax of 0.5% and domain names are, as from tax year 2008, eligible to the 80% tax exemption on income derived from intellectual property.
Conditions that need to be fulfilled
1. The IP must have been created or acquired after 31 December 2007;
2. The expenses in connection with the IP must be recorded as an asset in the balance sheet for the first book year for which the application of the regime is demanded;
3. The IP may not have been acquired from a person who is qualified as an “affiliated company”. The concept of affiliated company is clarified below.
Company X is considered as an affiliated company to company Y if :
• Company X directly holds 10% in the share capital of Y
• Company Y directly holds 10% in the capital of X
• 10% or more of the share capital of X and Y are directly held by the same company.
If you would like to know more information on how you could benefit from Luxembourg’s IP regime, you can contact us
Why incorporating a Luxembourg Company could help you to stay ahead in 2011
The start of 2011 provided mixed indicators of economic growth within the Euro zone. As Equity markets lead the way out of recession, international investors and entrepreneurs are presented with a new array of opportunities to maximise returns on investment. The consequent benefits of using one or more of the various forms of Luxembourg companies remain available.
As usual, Luxembourg has quickly adopted the European Directives on the financial sector and as such has maintained a favourable environment for such economic activities as Banking, Investment Funds, Insurance, Holding Companies, Finance, Leasing, Securitisation, Intellectual Property Companies and Informed Investor Investment Funds.
Luxembourg’s tax rates are at the European average level. Resident companies are subject to corporate tax on their worldwide income at the rate of 28.80% on their profits. Non-resident companies are only subject to corporate tax on profits made from Luxembourg source income. However, a relatively simple tax system and a friendly tax administration ensures that the tax base is kept at a reasonable level. Companies can benefit from various tax exemptions, for example tax-free dividend income and capital gains, 80% exemption on royalty income, no withholding tax on interest and dividends paid by investment funds.
In addition, personal income tax rates and social security contributions are one of the lowest in Europe. The progressive income tax structure has a maximum marginal rate of 40.56% on incomes above €39,885 per year and the social security rates are only 11% for the employee and 13% for the employer. No wealth tax and no inheritance tax between family members and a final 10% tax at source on interest keeps the tax burden for residents relatively low.
Since VAT was introduced in the European Union, Luxembourg has always applied the lowest VAT rates. The Luxembourg VAT rates are: 3, 6, 12 and 15%.
Luxembourg is, and for the foreseeable future will remain, a beneficial country for international business structuring because of its progressive and adaptive approach. If you want to take full advantage of Luxembourg’s situation and establish a company in Luxembourg, then talk to us about company formation and restructuring and everything else you need to know. As in all jurisdictions, the details of the tax system can be complex and full of both dangers and opportunities. Our team of experts is on hand to help you avoid those problems and take advantage of all the opportunities, contact us