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EU: Update on patent boxes and the EU Code of Conduct Group (Business Taxation)


van der Made

The Italian EU Presidency's Code of Conduct Group (Business Taxation) six-monthly progress report to the ECOFIN Council was finalised on December 11 2014. On patent boxes, following all discussions in the OECD Forum on Harmful Tax Practices (FHTP) around BEPS Action 5, a compromise regarding the modified nexus approach and how to assess whether there is substantial activity in an IP regime, was endorsed by the Code Group on November 20 2014. The Code Group agreed that all the EU patent box regimes that had been subject to examination by the Group are not compatible with the modified nexus approach as adapted by the compromise. As a consequence, these EU patent boxes should therefore be changed in line with the compromise. As part of the agreement, countries with existing IP regimes must agree to close these to new entrants by June 30 2016 and will abolish them by June 30 2021, after which all countries will be required to operate only nexus-compliant regimes. New entrants can therefore still enter the existing patent boxes until June 2016 and benefit from the five year grandfathering. The Code Group agreed that the legislative process necessary to give effect to that change and the related monitoring by the Code Group should commence in 2015. The Netherlands has made a reservation regarding the scope of IP assets qualifying for tax benefits under an IP regime in respect of the compromise regarding the modified nexus approach.

The modified nexus approach allows a taxpayer to receive benefits on IP income in line with the expenditures linked to generating the income. The UK-German proposal has since been endorsed by all OECD and G20 countries.

Bob van der Made (

PwC Brussels

Tel: +31 88 792 3696


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