IP Box: Tax reduction on IP rights income

The IP Box (also called Patent Box) has been established in France by the 2019 finance law. It gives companies the opportunity to benefit from a reduced corporation tax rate of 10% instead of 26,5% on IP rights income related to R&D projects.

IP Box is related to the EU recommandations, and satisfies to the Nexus approach. The operating principle of the Nexus Approach is to link the tax advantage to the R&D expenditure related to each asset, to support the companies that invest in local R&D to maintain EU territories (and France) attractivity. It also promotes IP Assets creation through R&D & Innovation.

Who can benefit from IP Box?

To qualify for IP Box, a company liable to French corporation tax must make profits from exploiting qualifying patented inventions. This regime is also open to copyrighted software companies. The company shall be able to prove the link between R&D expense and the IP asset. The company must either own qualifying patents or hold exclusive license for the rights to those patents, which must have been granted by the French Intellectual Property Office, the European Patent Office or certain European patent offices.

IP Box: What are the eligible assets?

  • Patents,
  • Vegetal Origin Certificates
  • Software protected by copyrights
  • Industrial manufacturing processes
  • Patentability proven by the French Industrial Property National Institute (INPI) Inventions.

IP Box: Optional regime but requested documentation

The IP Box regime is neither automatic nor mandatory. The company must activate the option, for each asset, product or service. As for the R&D Tax Credit, the company must be able to prove the eligibility of the IP rights income tax rate reduction.