Tag: Ip box

German royalty barrier to counter IP box-regimes

German royalty barrier to counter IP box-regimes

Some countries in Europe offer so-called IP or Patent boxes. To counter such tax practices, effective from 31 December 2017, Germany has introduced a new royalty barrier in ‘Law against Harmful Tax Practices in Connection with the Assignment of Rights. The law limits tax deductibility of expenses for the assignment of rights in order to prevent royalty income from not being taxed or taxed at a low rate and taxes income in the country where value is/was created. Deduction of expenses for the assignment of rights is restricted, where the following two cumulative requirements are met: 1) Royalty income for the assignment of rights is subject to low taxation which differs from standard taxation in the recipient’s country (preferential regime) 2) The licensor is a related party to the licensee within the meaning of Section 1 Paragraph 2 German Foreign Tax Act. Under these circumstances, expenses are not (or only partially) tax deductible. The non-deductible part of these expenses is ... Continue to full case