Recent tax proposals may make Luxembourg a more attractive location for Pharmaceutical and Life Sciences Companies. The Luxembourg government has recently proposed an 80% exemption on net positive income received as consideration for the use of, or the right to use, any copyright on software, any patent, trademark, design or model. As a result, the effective tax rate on the net IP income would be a relatively low 5.9%. The 80% deduction would also apply to taxpayers that have created a patent and used it for their own business purposes. The 80% exemption would also apply to capital gain realized on the disposal of such IP.
As Luxembourg is a member of the European Union and has a relatively large Treaty network, it is likely that royalties paid to a Luxembourg entity by related operating entities may be subject to tax favored withholding tax rates. This may make Luxembourg a favourable location for Pharma companies to house research and development efforts and associated IP ownership, in contrast to "tax haven" countries.
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