IP Box Tax Regime

IP BOX – TAX BENEFITS FOR INTELLECTUAL PROPERTY INVESTMENTS

The Corporate Profit Tax Law (hereinafter referred to as “the Law”) allows taxpayers to exclude a portion of their income from the tax base, significantly reducing their income tax liability at the end of a business year.

Furthermore, the Law stipulates that a legal entity generating qualified income from the ownership of copyrights, related rights, or from the exploitation of a patented invention, and which has made appropriate declarations in accordance with regulatory requirements, can reduce its tax base by up to 80% of such income.

Qualified Income


Qualified income does not include fees for the assignment of intellectual property rights but rather fees for the use of such rights and for rights assigned under a licensing agreement. It is crucial to differentiate between the total income of a legal entity and its qualified income. Qualified income is calculated based on the total revenue from the assignment of copyrights and related rights, offset by qualified expenses.

To determine qualified income for a specific tax period, multiply the total revenue derived from usage fees for the registered copyrights or related rights (or from the assignment of inventions) by the proportion of total qualified expenses to overall costs associated with those rights or inventions.

Qualified Expenses


Qualified expenses include all past and current expenses recognized by the law as necessary for research and development activities that lead to the creation of the registered intellectual property. If, in the initial tax period, the income generated is less than the qualified expenses, the total income is reduced to zero by the amount of these expenses.

These expenses encompass fees for research and development directly related to the creation of the intellectual property, fees for the transfer of ownership rights if conducted by a third party, among others. To be recognized as qualified, an expense must meet specific criteria outlined in the Law. Certain expenses, such as undocumented costs, some types of interest, penalties, and gifts, do not qualify.

Enhanced Deductions for Research and Development


Expenses directly related to research and development conducted domestically may be claimed in tax filings at twice their actual value. The Law defines “research” as original or planned studies aiming to generate new scientific or technical knowledge and “development” as the application of research findings or other scientific advances to create substantially new and improved materials, devices, products, processes, systems, or services prior to commercial deployment.

Consequently, salaries of employees directly involved in research and development, material costs, real estate expenses, leasing fees, and costs for expert assessments, consultations, and the legal protection of intellectual property all qualify for double deduction.

ELIGIBILITY FOR INTELLECTUAL PROPERTY TAX BENEFITS

The Law requires that a tax benefit applicant be the holder of the copyright, related right, or patent and have made a declaration to this effect. The Law does not define these terms but refers to specific regulations that govern their use and protection.

Registration is necessary for claiming tax benefits for patents, whereas mere deposition suffices for copyrights and related rights. Given the frequent updates and modifications to databases or computer programs, any substantial updates or changes to a registered item are recognized if they maintain identifiable characteristics of the original registration and are deposited by the tax filing deadline.

If the legal protection of an intellectual property right lapses, the holder cannot claim tax benefits from the time the protection expires.

DOCUMENTATION FOR INCOME AND EXPENSES

Qualified incomes must be explicitly noted in the tax statement and supported by adequate documentation, which includes verification from competent authorities, registration documents, contracts, invoices, and a statement from the legal representative confirming the registration’s validity. Additional records are required for research and development activities, including the extent of such activities.

For intellectual property treated as non-monetary capital, relevant documentation must include a decision to increase the base capital and a certified copy of the founding act, among others.