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LUXEMBOURG


IAS 38.21 ALLOWS AN INTANGIBLE ASSET TO BE RECOGNISED IF IT IS PROBABLE THAT THE EXPECTED FUTURE ECONOMIC BENEFITS THAT ARE ATTRIBUTABLE TO THE ASSET WILL FLOW TO THE ENTITY, AND THE COST OF THE ASSET CAN BE MEASURED RELIABLY.


Second, the IP right must be recorded on the third party’s balance sheet with its acquisition price and expenditures, amortisations and deductions for depreciations that are directly related to the creation of the asset. The accounted value has to be amortised over its useful life. This is in accordance with IAS 38.21, a financial reporting standard. This allows an intangible asset to be recognised if it is probable that the expected future economic benefits that are attributable to the asset will flow to the entity, and the cost of the asset can be measured reliably.


Third, IP may not be acquired from an affiliated company. The objective of this constraint is to avoid an IP right benefiting from tax exemption within the same group of companies more than once. The tax law defines an affiliated company as a company that holds or is held by a direct participation of at least 10 percent of the share capital (parent company/subsidiary), or a third company that holds at least 10 percent of the licensee or purchaser as well as the licensor or seller (sister companies). The holding of a participation through a tax- transparent entity is to be treated as a direct holding in proportion to


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the part that is held in the transparent entity. Interestingly, these anti- abuse provisions do not restrict the sale or licensing of IP assets to an indirectly associated company (grandparent company). Furthermore, there is no limitation regarding the acquisition or licensing of IP assets from a shareholder who is a physical person. The relevant date for the evaluation of the affiliation is solely the moment of the transfer or licensing of the intangibles.


Qualifying income and IP evaluation


A taxable basis is the positive net income defined as the gross revenue that is generated from an IP asset, minus disbursements that must be in direct economic relation with this income, including amortisations and deductions for depreciations. Costs that are related to research do not have this direct link. If a patent application is rejected, previously accounted deductions must be added to the taxable net profit. Foreign withholding tax that is paid on revenues that relate to exploiting IP can only be deducted at a 20 percent level if the foreign net revenues


World Intellectual Property Review e-Digest 2012 173


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