Belgium has updated it’s innovation box to comply with the BEPS Action 5 recommendations; the changes are retrospective to July 2016, although claimants who were under the old rules continue to be grandfathered into those rules until the end of June 2021 (pretty much as every other country making changes has done).
Qualifying income for the innovation income deduction (as it’s technically called) include:
- embedded income – from the sale of products or services covered by qualifying IP, or made by IP-protected processes;
- licensing income;
- infringement income; and
- the gain on sale of relevant IP
Qualifying IP rights:
- Supplementary Protection Certificates (SPCs);
- Plant variety rights (from 1 July 2016);
- Orphan drugs (from 1 July 2016, limited to ten years);
- Data or market exclusivity granted by a public body (from 1 July 2016); and
- Software copyright (from 1 July 2016).
The profits from qualifying income relating to qualifying IP rights are then subject to a nexus fraction, as recommended in Action 5, and the amount resulting from the calculation will be eligible for an 85% deduction on net innovation income (the old regime allowed an 80% deduction).
The Ukraine has introduced a restriction on deduction of royalties – a payment of royalties to a non-resident entity, even if it is an unconnected party at arm’s length, will be non-deductible if:
- the recipient is not the beneficial owner of the royalties;
- the IP rights to which the royalty relates have a Ukrainian origin; or
- the royalties are not subject to tax in the recipient’s country of residence.
Before the changes, the payer could deduct the royalty payment if they could show the payment was at arm’s length.
WebMindLicenses Kft. v Nemzeti Adó- és Vámhivatal Kiemelt Adó- és Vám Főigazgatóság (Case C–419/14)
The ECJ decision on the WebMindLicenses case (published 17 Dec 2015) provides guidance on points to consider when determining whether a licensing agreement amounts to VAT ‘abuse’ (and, accordingly, points to watch to make sure a licensing agreement is not abusive!)
It’s been talked about for years, but finally there’s something to look at – members of the House Ways & Means Committee have produced a draft bill for an ‘innovation box’ for the USA (http://waysandmeans.house.gov/wp-content/uploads/2015/07/Innovation-Box-2015-Bill-Text.pdf).
The EC announced to today (22nd Oct) that it has decided to “set up a group of experts in the field of taxation of the digital economy …[to] help to develop a comprehensive Union position on tax issues in the digital economy by analysing the issues at stake and providing the Commission with a range of solutions to address these issues”.
Interesting article at Forbes on Apple’s tax position in Ireland: pity the author doesn’t really appear to have thought things through all the way or developed the discussion usefully:
The Guardian’s headlines on VAT are beginning to irritate me.
Amazon might “make UK publishers pay 20% VAT“, but only if it sells a service to those publishers and in that case, it would probably be self-assessed by those publishers under the reverse charge mechanism. Regardless, it’s UK tax law that makes the publishers pay VAT.
Malta has brought into force the copyright exemption announced in the Budget last November. The Budget Measures Implementation Act (pdf – English version starts about 40 pages in) amended Article 12(1)(v) of the Income Tax Act to exempt royalties, advances and similar income derived from copyright (whether from a trade, investment or otherwise).
The Hungarian government last week put forward plans for a new capital gains exemption for qualifying intellectual property. Broadly, gains relating to qualifying intellectual property will be exempt from tax if the seller has held the property for at least one year. Where the sale doesn’t qualify for the exemption, a form of roll-over relief will be available so that the gain can still be exempt if re-invested in qualifying intellectual property within three years of the gain arising.