![](https://letstalkglobaltax.forvismazars.com/files/2021/10/Anne-sophie-Palacin_profile.jpg)
The French IP Box, an innovative scheme for software creators
The “new” regime of Article 238 of the French Tax Code (FTC) applies to patents in the strict sense, to other industrial property titles such as utility certificates and supplementary protection certificates attached to a patent, but also to software.
As such, the regime of article 238 of the CGI applies to software protected by copyright, including their successive versions, as long as this software meets a condition of originality.
The regime of the article 238 of the FTC covers disposal, grant, or sub-grant. When the contract relates to a set of elements of which only some can benefit from the preferential regime, it is up to the company to break down the overall price to determine the part of the price corresponding to the assets eligible for preferential treatment.
The intangible assets referred to must have the character of fixed asset elements. This condition is met when the common destination of these assets is to be used by the company for its ongoing operations. The assets in question do not need to be actually capitalised.
An option (or election) that needs to be formalised
The regime applies at the option of the company directly by applying it in the corporate income tax return. The option is not global and must be applied either per asset, or for each good or service, or for each family of goods or services. Once made, the option requires the associated computations to be made (see below). The option continues in effect until revoked, after which it cannot be reinstated for the particular asset, product or service for which it was made.
In the event of a tax audit, the company must be able to provide the authorities with a dedicated documentation to justify the determination of the net profit subject to the favourable regime and the originality of the software.
A net result subject to the reduced rate
Pursuant to this regime, the net income from disposals, grants or sub-grants benefits from reduced tax rates i.e., a reduced corporate tax rate of 10% (instead of the standard 25% rate).
For the determination of the net result, only the income relating to the eligible assets must be considered. If these assets are present in contracts relating to a set of elements (know-how, services, etc.), the company must apply distribution keys in order to apportion the income relating to the eligible assets.
For the determination of the net result which can benefit from preferential rates, only research and development expenses which are directly related to the assets concerned and are carried out directly or indirectly by the company (thus including the outsourced expenses), can be considered. As a matter of principle, overhead costs are not eligible expenses. The expenses to be considered are those incurred by the company during the financial year.
A “nexus” ratio is then applied to this net result to determine the amount that can qualify for relief.
The “nexus” ratio to be applied to net income is calculated as the ratio between:
• numerator: 130% of R&D expenses directly related to the creation and development of the intangible asset carried out directly by a member company of the group or by independent companies
• denominator: expenses appearing in the numerator as well as expenses outsourced to affiliated companies
In principle, all expenses incurred since the origin of the asset must be taken into account for the calculation of the result subject to the regime of article 238 of the FTC. The ratio is thus calculated for each fiscal year and considers the expenses incurred by the company for this fiscal year as well as those incurred for previous fiscal years.
If the net patent box result is profitable, the ratio determined as above is applied to it and the result obtained will be separately treated from remaining taxable profits and subject to the reduced rate of 10%. The net profit after application of the ratio can also, by decision of the company’s management, be set off against the tax loss of the financial year from other activities.
If the net result of the grant is a loss, it is carried forward and must be offset against future net profits eligible to the IP Box, not other types of profit.
A limited interest but which should not be ruled out for loss-making companies
It is possible to offset the net income eligible for the favourable regime with the tax losses under common law. The administrative guidelines give an example of application and makes it possible to anticipate cases of profit reversal, in comparison with the common law regime (without IP Box).
In practice, it would be appropriate to estimate the savings generated by this system with regard also to the tax credits available, the available losses carried forward and the impact on employee profit-sharing of the increase in the taxable base at the normal rate.
![](https://letstalkglobaltax.forvismazars.com/files/2021/10/Anne-sophie-Palacin_profile.jpg)
![Phasellus platea fames vel porttitor](https://letstalkglobaltax.forvismazars.com/files/2024/07/GettyImages-1171160847-1-1024x320.jpg)
Peru – Chile double tax treaty: new interpretation guidelines from Peru’s Tax Administration radically affect the taxation of indirect disposals of shares
Background Under Peruvian Income Tax provisions, non-residents are levied on Peruvian-source income identified based on an all-exhaustive list. Capital gains arising from an indirect disposal of shares issued by a company incorporated in Peru qualify as Peruvian-source income. According to these rules, an indirect disposal occurs when shares of a non-resident company are sold, and […]
![Phasellus platea fames vel porttitor](https://letstalkglobaltax.forvismazars.com/files/2024/03/0307_GT_US-–-Chile-bilateral-tax-treaty-1-1024x576.jpg)
New agreement to avoid double taxation between Chile and the United States
This article discusses the effects generated by the agreement which avoids double taxation between Chile and the United States. After many years, this agreement came into force on December 19, 2023, when President Joe Biden signed it. The treaty applies from 1 February 2024 in respect of withholding taxes and applies for all other taxes […]
![Phasellus platea fames vel porttitor](https://letstalkglobaltax.forvismazars.com/files/2023/11/chile-tax-blog-1024x320.png)
Chile rejects tax reform bill
In July of 2022, Chile announced a new tax reform seeking to improve tax justice, address tax evasion and encourage economic growth to finance other structural reforms that expand social rights and promote productive and regional development. President Gabriel Boric defended it by saying that redistribution of wealth is key to address the ailments manifested […]
![Phasellus platea fames vel porttitor](https://letstalkglobaltax.forvismazars.com/files/2023/11/AI-Mexico-1024x320.png)
Use of artificial intelligence for tax audits in Mexico
The Tax Administration Service (SAT) is an administrative authority in Mexico empowered to conduct audits of taxpayers with respect to their tax obligations. The primary objective of the SAT is to facilitate and encourage payment of the required taxes and to regulate the imposition of infractions and penalties derived from non-compliance. In the late 1990s, […]
![Phasellus platea fames vel porttitor](https://letstalkglobaltax.forvismazars.com/files/2023/09/US-France-1024x320.png)
US trust income: opinion of the French administrative Supreme Court clarifies French tax treatment
The French administrative Supreme Court rendered an opinion on 18 April 2023 regarding the French tax treatment of trust income in the French-US context. While this opinion clarifies an area of uncertainty, it certainly raises issues of double taxation which will not improve France’s tax attractiveness when dealing with the US trusts. France does not […]
![Phasellus platea fames vel porttitor](https://letstalkglobaltax.forvismazars.com/files/2023/03/Tax-blog-UK-Us-tax-desk-banner-1024x320.png)
UK Spring Budget 2023: Focus on long-term growth
Everything everywhere The UK Chancellor delivered the 2023 Spring Budget on March 15. Focused on Enterprise, Employment, Education and Everywhere, the measures aim to encourage investment in the UK, increase labor market activity and foster innovation and creativity in the UK. The anti-recessionary measures are expected to have a positive effect across most industries for […]
![Phasellus platea fames vel porttitor](https://letstalkglobaltax.forvismazars.com/files/2023/02/Berlin-1-1024x410.png)
Tax treatment of US companies in Germany
Background The legal qualification and taxation of US companies in Germany, such as Limited Liability Companies (LLCs) or Subchapter Corporations (S-Corps), can be challenging. One example showing the differences in qualification and taxation can be seen in the different criteria applied for the qualification as a corporation versus a partnership for tax purposes. The ATAD […]
![Phasellus platea fames vel porttitor](https://letstalkglobaltax.forvismazars.com/files/2023/01/Tax-blog-Canada-Jan-banner-1024x410.png)
Canada introduces excessive interest and financing expenses limitation rules
Following recommendations of the Base Erosion Profit Shifting (BEPS) report by the Organisation for Economic Co-operation and Development (OECD), Canada is introducing excessive interest and financing expenses limitation (EIFEL) rules. In general terms, EIFEL rules limit the amount of net interest and financing expenses that may be deducted in computing a taxpayer’s income to no […]
![Phasellus platea fames vel porttitor](https://letstalkglobaltax.forvismazars.com/files/2022/10/Chile-articlev2-1-1024x320.jpg)
Chile looks to overhaul tax credit system
Chile introduced a new tax reform bill on 7th July 2022. The “tax reform towards a fiscal pact for social development and justice” was presented by the Chilean President and is currently progressing through the National Congress. In line with Chile’s ongoing plans to restructure the current system, the bill is aiming for a 4.1% […]
![Phasellus platea fames vel porttitor](https://letstalkglobaltax.forvismazars.com/files/2022/09/OculusExteriorNYC2020-31-1024x576.jpg)
United States responds to Hungary’s global minimum tax veto
On 8 July 2022, the US Treasury Department announced that it would unilaterally terminate its 1979 bilateral treaty with Hungary. The decision follows Hungary’s veto of an EU directive implementing a global minimum tax.
![Phasellus platea fames vel porttitor](https://letstalkglobaltax.forvismazars.com/files/2023/02/US-tax-March-1024x320.jpg)
International tax outlook from the UK
International business everywhere will have been affected by the devastating events in Ukraine, with a knock-on impact on energy, supply chains, consequent inflation and the impact of sanctions. This comes with significant developments in the international tax landscape, which also requires attention. This article discusses the tax landscape from a UK perspective, considering domestic and […]
![Phasellus platea fames vel porttitor](https://letstalkglobaltax.forvismazars.com/files/2023/02/US-tax-Jan-1024x410.jpg)
Proposed new EU “UNSHELL” Directive will impose penalties on entities
On 22 December 2021, the European Commission published a proposal for a Directive to prevent the misuse of shell entities for tax purposes (described as “Unshell Directive” or also referred to as ATAD III). The draft Directive aims at identifying and penalising entities that do not maintain sufficient substance within the EU. Additional reporting requirements […]
![Phasellus platea fames vel porttitor](https://letstalkglobaltax.forvismazars.com/files/2022/01/GettyImages-537682679-2-1024x689.jpg)
MNEs subject to 15% minimum tax rate from 2023: main OECD provisions and EU implementation proposals now available
The OECD two-pillar approach In October 2021, the OECD’s 137 Inclusive Framework members agreed to adopt a two-pillar approach to address the tax challenges of the digital economy. Pillar I provides for new profit allocation and nexus rules for MNEs with a turnover greater than EUR 20 billion and profit before tax margins of 10% […]
![Phasellus platea fames vel porttitor](https://letstalkglobaltax.forvismazars.com/files/2021/10/GettyImages-147456329-2-1.jpg)
Is the new two-pillar solution to address tax challenges suitable for African countries?
This new solution is expected to reallocate more than $100bn of profit annually to market jurisdictions. However, this raises the question, to what extent emerging economies, and more specifically, African countries, will be entitled to levy taxes on profits generated by multinational enterprises from their markets? This source and others are sorely needed by these […]
![Phasellus platea fames vel porttitor](https://letstalkglobaltax.forvismazars.com/files/2021/09/Tax-issues-arising-from-corporate-amalgamations-in-Hong-Kong.jpg)
Tax issues arising from corporate amalgamations in Hong Kong
In June 2021 Hong Kong finalised legislation codifying the Inland Revenue Department’s tax assessment practice relating to corporate amalgamations. For qualifying companies, it is possible to elect (within one month of the amalgamation) for special tax treatment for pre-amalgamation losses, succession to business assets, amongst other areas. While the new legislation provides greater certainty on […]
![Phasellus platea fames vel porttitor](https://letstalkglobaltax.forvismazars.com/files/2021/07/GettyImages-994521488-1.jpg)
Agreement on OECD pillar 1 and 2 proposals (as refined by the US initiative)
As of 13 July, 132 of 139 jurisdictions (including Bermuda, Cayman Islands, BVI, Switzerland, and the Bahamas) agreed to the OECD Pillar 1 and 2 proposals as refined by the US initiative. The seven that did not were: Ireland, Estonia, Hungary, Barbados, Kenya, Nigeria, Sri Lanka. The OECD press release can be found here and […]
![Phasellus platea fames vel porttitor](https://letstalkglobaltax.forvismazars.com/files/2021/07/shutterstock_191049641-1.jpg)
Recent developments in the concept of a permanent establishment in Chile
International taxation is based on residence as the point of connection of a subject with a given territory. However, today’s world is characterized by open economies competing to attract many companies and governed by technology. Apart from the tax connection point represented by the tax domicile in a given country, another element relevant when taxing […]
![Phasellus platea fames vel porttitor](https://letstalkglobaltax.forvismazars.com/files/2021/06/iStock_000009688215_Large-1.jpg)
G7 Global tax agreement
The finance ministers of the G7 have issued a news brief indicating their agreement on global tax reform that “….will mean the largest multinational tech giants will pay their fair share of tax in the countries in which they operate….”. This consists of two parts: global firms with at least a 10% profit margin would […]
![Phasellus platea fames vel porttitor](https://letstalkglobaltax.forvismazars.com/files/2021/03/Brexit-1.jpg)
Brexit impact on in/outbound payments
When the UK finally left the EU ended on 31 December 2020, the application of provisions that have been beneficial to cross-border payments within the EU ceased, or will cease to apply. The elimination of withholding taxes, formerly part of these provisions, means companies with cross-border dividend, interest and royalty payment flows to or from […]
![Phasellus platea fames vel porttitor](https://letstalkglobaltax.forvismazars.com/files/2021/03/GettyImages-639841400-1.jpg)
New German tax developments regarding intellectual property (IP)
Decree of the Federal Ministry of Finance dated 11 February 2021 – Remuneration of the temporary transfer and the disposal of rights which are entered in a German public register. Further information on German tax developments relating to intellectual property (IP) registered in Germany has been released by the German Authorities. This helps to clarify how the German taxing right can apply to non-German users or vendors of this IP. This […]
![Phasellus platea fames vel porttitor](https://letstalkglobaltax.forvismazars.com/files/2021/02/Ireland.jpg)
Changes to interest deduction limitation rules
The EU Anti-Tax Avoidance Directive (ATAD), contains five legally binding anti-abuse measures, which all EU member states are required to apply against common forms of aggressive tax planning. The Directive includes an exit tax, a general anti-abuse rule, controlled foreign company rules, measures to tackle hybrid mismatch arrangements, in addition to an interest limitation rule. We […]
![Phasellus platea fames vel porttitor](https://letstalkglobaltax.forvismazars.com/files/2021/02/OECD-3.jpg)
OECD recommendations on comparability analysis during Covid-19 (Part 2)
Covid-19 has brought unprecedented social and economic challenges that will durably impact the world economy. Specifically, the pandemic has surrounded the Multinational Enterprises (MNEs) with many issues to be managed such as: insufficient cash flows, unpredictable profitability, unreliable third-party data (which is at the heart of arm’s length principle), non-operative supply chains, import/export limitations, possible […]
![Phasellus platea fames vel porttitor](https://letstalkglobaltax.forvismazars.com/files/2021/02/OECD-3.jpg)
OECD recommendations on comparability analysis during Covid-19 (Part 1)
Covid-19 has brought unprecedented social and economic challenges that will durably impact the world economy. Specifically, the pandemic has surrounded the Multinational Enterprises (MNEs) with many issues to be managed such as: insufficient cash flows, unpredictable profitability, unreliable third-party data (which is at the heart of arm’s length principle), non-operative supply chains, import/export limitations, possible […]
![Phasellus platea fames vel porttitor](https://letstalkglobaltax.forvismazars.com/files/2021/02/DIGit.jpg)
Making sense of tax systems in a digitalised world
How do we develop a global tax system that takes into account business innovation and the digitalised economy, yet is fair to all stakeholders? It’s a debate world governments continue to grapple with as they consider radical reforms to adapt century-old tax rules to the 21st-century digital economy. It’s also a question we put to […]
![Phasellus platea fames vel porttitor](https://letstalkglobaltax.forvismazars.com/files/2021/01/GettyImages-1071488226-1024x683.jpg)
TRACE made it to the EU Commission’s agenda. Yet another burden approaching? Or an opportunity?
On 24 September 2020, the European Commission published Communication COM (2020) 590 (final) regarding the action plan in respect to the Capital Markets Union. Action 10 of this plan envisages a EU legislative initiative by Q4 2022 to introduce a common, standardised, EU-wide system for withholding tax relief at source, based on the OECD Treaty Relief and Compliance Enhancement (“TRACE”) Implementation Package. What is this […]
![Phasellus platea fames vel porttitor](https://letstalkglobaltax.forvismazars.com/files/2021/01/GOOGLE.jpg)
Another ‘Google’ tax hits this week – this time in Spain
Following the path of other developed countries (e.g., France, United Kingdom, Italy), Spain enacted last October a brand new “tax on certain digital services” that will come into effect on 16 January 2021. Background of a tax (not so new) The origin of this tax can be found in Action 1 of the BEPS report […]
![Phasellus platea fames vel porttitor](https://letstalkglobaltax.forvismazars.com/files/2021/01/digitisation-tax.jpg)
Important tax developments for digital economy
Over the past few years, the digital economy has become a hot topic around the world. The international community has made substantial progress towards reaching a consensus-based and long-term solution to prevent tax challenges arising from the digitalisation of the economy. Seeking to keep working towards an agreement by mid-2021, the Organisation for Economic Co-operation […]
![Phasellus platea fames vel porttitor](https://letstalkglobaltax.forvismazars.com/files/2020/12/oecd-2-1024x410.jpg)
OECD guidance about the transfer pricing implications of the Covid-19 pandemic
The OECD released its guidance on the transfer pricing implications of the Covid-19 pandemic on 18 December 2020. This guidance was eagerly awaited by many MNEs whose statutory accounts will be closed by the end of the year, and which need to adjust their 2020 transfer pricing policies to reflect the financial impact of the […]
![Phasellus platea fames vel porttitor](https://letstalkglobaltax.forvismazars.com/files/2020/12/Brexit-2.jpg)
The UK fiscal environment for international business following Brexit
Following the UK’s spending review statement of 25 November, there is now greater clarity on how the UK economy will be taken forward into 2021 following the Covid-19 pandemic and exit from Brexit transition. Despite incurring record UK government borrowing this year of around £395bn, the significant further borrowing to fund investment during the recovery […]
![Phasellus platea fames vel porttitor](https://letstalkglobaltax.forvismazars.com/files/2020/12/France-digital-economy.jpg)
French landmark decision fighting against “commissionaire” arrangements in the digital economy
After the French government enacted a 3% digital services tax on gross income, it is now the French Administrative Supreme Court which rendered a landmark decision for international groups providing digital services in France by strongly extending the definition of permanent establishment in the presence of commissionaires. This new case law remains also relevant for […]
![Phasellus platea fames vel porttitor](https://letstalkglobaltax.forvismazars.com/files/2020/12/permanent-establishment.jpg)
Permanent establishment through a management company
BEPS 2.0 continues to call into question what indeed is a permanent establishment (PE). We all know that ‘bricks and mortar’ is almost ‘a ghost of Christmas past’ and states are now focused more on activities that have the potential to create nexus or PE status. This is certainly the underpinning of the sweeping world […]
![Phasellus platea fames vel porttitor](https://letstalkglobaltax.forvismazars.com/files/2020/12/Impot-sur-la-source.jpg)
Tax holiday checklists: make your list and check it twice, especially for withholding tax changes
Generally speaking, year-end is that time of year when we clean up all open items in the current year and head into the new year with a fresh outlook and perspective. This also applies to tax. You cannot be blind to the overwhelming number of tax checklists published to help individuals, in particular, get their tax affairs […]
![Phasellus platea fames vel porttitor](https://letstalkglobaltax.forvismazars.com/files/2020/11/brexit-1024x683.jpg)
The new year brings new social security challenges post- Brexit
What is the issue? With Brexit talks still ongoing, employers should be planning for the impact of a hard Brexit on social security coverage and benefit provision for their employees who travel between the UK and EU (including EEA & EFTA countries and Switzerland) for work. HMRC’s October employer bulletin provided a welcome update on […]
![Phasellus platea fames vel porttitor](https://letstalkglobaltax.forvismazars.com/files/2020/11/Digital-economy-1024x683.jpg)
Is patience growing thin for a unified approach to digital taxation?
The global economy is experiencing digital transformation at a blistering pace with the rise of e-commerce. The digital economy permeates all aspects of life including how we eat, sleep, breathe, and communicate. It has immense impact on the world’s economic landscape touching all industries and sectors from aviation to wholesale trade. The digital economy is […]
![Phasellus platea fames vel porttitor](https://letstalkglobaltax.forvismazars.com/files/2020/11/ICAP-1024x683.jpg)
ICAP 2.0 – A solution to aggressive tax audits for MNEs during Covid-19
Governments damaged by the Covid-19 pandemic are likely to be taking a more aggressive approach in tax field audits on multinational enterprises (MNEs), at least until after their respective economy is on its way to recovering from the impacts of the pandemic. The OECD launched a pilot of the International Compliance Assurance Programme (ICAP) on […]
![Phasellus platea fames vel porttitor](https://letstalkglobaltax.forvismazars.com/files/2020/11/8.4-MA-tax-1024x683.jpg)
The future of joint tax audits beyond Covid-19
The current restrictions imposed by multiple countries to combat the Covid-19 pandemic have limited the possibilities for conducting external tax audits. However, the current pandemic and its consequences for the world economy highlight again that the number of internationally active companies is increasing. This has a significant impact on the future of tax audits. Coordinated […]