Patents and Tax Planning in Benelux

In financial difficult years every CFO is eager to listen to ideas to turn IP in their companies’ intangible assets into savings or better, cash. Of course monetization of unused patent portfolios is an option but this is very difficult to manage for any mid sized company with little or no experience with IP.  Monetization strategies , like buy outs, securitizations, stick and carrot licensing operations are all options for seasoned companies with existing licensing experience or those that have enough patience to undertake this difficult and expensive task. Tax efficient planning of intellectual property is another way of bringing  in considerable advantages using intangibles.  However, as Bill Gates said, “intellectual property has the shelf life of a banana”[1], it makes sense not to just sit on your IP but rather actively look how to best turn a cost item into an item that can save costs or even make In Europe many tax jurisdictions have discovered that offering tax incentives on IP and R&D planning are strong arguments to pull companies over to their jurisdictions, bringing in employment, innovation stimuli and the like. A real “competition” has taken place among European countries who offers the best tax regime intellectual property. Luxembourg, Hungary, Ireland, Netherlands, Belgium and Guernsey are among those that are most frequent used.

As for patents, the Benelux countries (Belgium, Netherlands and Luxemburg) each introduced IP tax law incentives to attract IP holders to set up their tax and corporate structure using  a Benelux country to set up so called Special Purpose Companies (“SPC”) to reduce their global tax liability by structuring the ownership and licensing of intellectual property rights.

The purpose of using a SPC is to lower a an owner’s liability to global taxation on receipt of royalties derived from the licensing of its intellectual property. By structuring the licensing arrangement in this way, advantage of relevant tax treaties and domestic tax benefits available. Besides tax deferral or savings, other economic reasons such as centralization and thus consolidation of a group’s international IP rights can play a major role in the decision-making process. These SPC are entitled to the same extensive range of international and local tax benefits as a royalty company. Some trust companies, like Orangefield Trust in Luxemburg offer companies that are completely independent from the owner of the IP, which entitles that company to additional tax exemptions and benefits otherwise denied to royalty companies.

Belgium, Netherlands and Luxemburg have introduced tax laws that were officially aimed at improving innovation but of course with the strong intention to attract companies to place their patent portfolio in a Benelux based entity with the incentive to provide lower tax exposure. The big difference between the Benelux countries is which patents qualify for the tax regime. Are these only patent applications filed by their resident company as a result of own R&D, or can also acquired patents (e.g. sales from another patent owner, or patent aggregator or patent investor).

All three Benelux countries compete with each other on what tax incentives to offer as appears from Benelux tax competition to attract IP income is on again[2] from Wim Eynatten and Patrick Brauns, both tax consultants at Deloitte.

Luxembourg seems to offer the most attractive tax treatment for patents and other IP. Not only is Luxembourg -other than Belgium and The Netherlands – offering this regime for patents that are acquired from third parties (not being an affiliate company) a very important aspect (maybe the decisive one) is that Legal ownership of the patents (and IP) can remain at the company seeking the tax incentives but that currently holds the IP. Economic ownership suffices. Most companies do not like to transfer legal ownership to a company they have no control over or to a company that is outside their corporate realm. Luxemburg seems to have cleverly found a way to accommodate this sensitive point for any CFO to use the tax regime and wishes not to be confronted by his IP colleagues who are antagonistic towards the idea to have the patents outside their immediately legal control.  Summary of the pros and cons of the three countries:

Comparative overview of IP income tax incentives regimes

Tax Factors





0% to max. 6.8%



Intellectual property

Patents and extended patent certificates

Self-developed patents, IP from innovation and plant breeder’s rights

Software copyrights, patents, trademarks, domain names, designs and models

Type of income

Patent (improvement) income

Patent/innovation income and capital gains

IPR income and capital gains

Can work be performed outside the jurisdiction?

Yes: but some level of substance/activity required in Belgium



Legal ownership of patent/IP right required?



No: economic ownership is sufficient


[1] see also our earlier blog “Patent Perishables

[2] this text if from an article by Wim Eynatten and Patrick Brauns, “Benelux Tax Competition to attract IP income is on again” which appeared in International Tax Review. IPEG is grateful that the authors have kindly consented in taking parts of their publication for this blog.

Blogger also thanks Peter Flipsen, international tax lawyer at Simmons & Simmons for his help.

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