Luxembourg IP Box Regime

Luxembourg's new IP regime provides an 80% exemption on eligible net income and certain gains derived from qualifying IP assets, plus a full exemption from net wealth tax for qualifying IP assets. The regime was introduced in March 2018 effective for income from 1 January 2018.

For a Luxembourg City corporate taxpayer, this can achieve an effective aggregate tax rate of approximately 4.774% on qualifying net IP income in tax year 2025. The regime applies to corporate taxpayers earning income from qualifying IP assets and meeting nexus and substance requirements.

Qualifying IP typically includes patents, functionally equivalent rights, and copyright-protected software. Marketing intangibles such as trademarks are generally excluded. Benefits are calculated using a BEPS-aligned nexus approach requiring linkage between qualifying income and qualifying R&D expenditures incurred by the taxpayer.

The regime is typically claimed via corporate tax return with supporting documentation. Taxpayers must maintain strong R&D cost tracking, IP documentation, and transfer pricing support where relevant. Advance tax rulings may be used for certainty but are not mandatory.