On 28 June 2019, the Luxembourg tax authorities issued Circular
50ter/1 ("IP Circular") which provides
further guidelines on the application of the law dated 17 April
2018 introducing a new intellectual property ("IP")
regime in Luxembourg ("IP Law").
As a reminder, the IP Law provides for an 80 percent exemption
on income derived from the marketing of certain IP rights, as well
as a full exemption from net wealth tax. Eligible assets are
patents, utility models, and other IP rights that are functionally
equivalent to patents as well as software protected by copyright.
The new IP regime is based on the "modified nexus
approach" in line with the recommendations of the BEPS final
report on action 5, following which only revenues that are directly
related to qualifying expenditure can benefit from the
exemption.
