Patent Box
Context
The Patent Box is a tax measure introduced in 2019 by the French Finance Act (art 238 of the General Tax Code). While the Research Tax Credit (CIR-CII) aims to support companies’ Research and Innovation efforts, the IP Box encourages the development of intellectual property (IP) assets in France. But what exactly is it, and how can it benefit your company? In this article, we take a look at the IP Box, the eligible assets and how the scheme works.
What is the Patent Box ?
The Patent Box is a way for companies to benefit from a lower rate of corporation tax. How can they do this? By valuing intellectual property (IP) assets such as patents or copyrighted software. In concrete terms, this means that income from the sale or use of these assets can be taxed at a reduced rate of 10% instead of 25%.
Which assets are concerned?
Assets eligible for the Patent Box include patents, copyrighted software, industrial manufacturing processes and plant breeders’ rights.
Who can benefit from the IP Box?
Two conditions are necessary to implement the Patent Box. Pay corporate tax and own intellectual property (software, patents, COV).
How does it work? The Nexus Ratio
The Patent Box enables you to benefit from a reduced tax rate on the difference between your intellectual property income and your development expenditure over the same tax year. This calculation, perfectly mastered by our teams, is carried out separately for each intellectual property. Since 2019, this amount must be multiplied by the “nexus ratio”, which rewards in-house development or development outsourced to external companies, and penalizes the purchase of intellectual property and development outsourced to your foreign subsidiaries.
Patent Box: how do I get it?
The Patent Box is not automatic: you must choose to apply it. As with the Research Tax Credit (Crédit Impôt Recherche – CIR), you need to put together files explaining how you calculated the eligible profit, and demonstrating that you own the items concerned. These documents must be ready in the event of a tax audit.
Conclusion
In conclusion, the Patent Box offers companies an opportunity to pay less tax by enhancing the value of their IP assets. It also encourages innovation and development in France. So, if your organization has developed software, patents or COV as part of its activities, check without delay whether you are eligible for the Patent Box.