Luxembourg has been proactive in developing its IP standards and is party to all the major IP treaties and conventions. The Luxembourg authorities have created a safe IP environment by implementing EU directives as well as international agreements and treaties, such as the Agreement on Trade-related aspects of Intellectual Property rights (TRIPS) in order to secure IP rights. Besides the numerous service providers offering assistance for all economic and legal aspects of IP, innovation as a source of IP is supported by the Luxembourg Agency for Innovation and Research, Public Research Centres and the University of Luxembourg, as well as by government-backed business-incubators and R&D investment incentives.
In order to encourage R&D activities, the Luxembourg government passed a law in 2008 that provides for an 80% tax exemption of certain types of IP-related income (or of deemed IP-income if a taxpayer creates IP for his own use) as well as capital gains realised on the disposal of such IP.
The exemption applies to income paid to Luxembourg taxpayers (individuals or companies) for the use of any software copyright, any patent, trademark, design, model or domain name.
Patents developed and used in-house may under certain conditions generate a deemed income deduction.
Contrary to companies located in offshore jurisdictions, a Luxembourg resident is entitled to benefit from a reduction of withholding tax on royalty income received from abroad, based on the current EU directive on royalty payments or the relevant double tax treaties.
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