Italy Patent Box

The Stability Law introduced a Patent box regime in Italy in 2015. The Patent box regime is optional, it allows businesses to benefit from lower effective tax rates on profits derived from intellectual property.
This qualifying intellectual property includes patents, know-how, other industrial information and software, covered by copyrights, models and designs that could be legally protected. Trademarks qualify for the regime only if ongoing R&D activities are required for their development and maintenance. Additionally, a possibility to consider complementary intangible assets as a single intangible asset for the purposes of the Patent box regime was introduced in 2016.
The provisions in the Patent box regime are in line with the OECD nexus approach, which is defined by Action 5 of the OECD BEPS Project. It allows a taxpayer to benefit from an IP regime only to the extent that the taxpayer itself incurred qualifying research and development (R&D) expenditures that gave rise to the IP income.
The patent box regime may provide an exemption from corporate and regional income tax. The exemption is equal to 30% for 2015, 40% for 2016 and 50% starting from 2017, and is granted for five years.
The exact calculation of the tax exemption depends on the share of profit generated by the IP. Patent box regime can only be applied for the holder of the IP rights carrying out R&D activities, which means either the owner of the IP rights or the licensee. When the patent box regime involves direct use of IP, obtaining a ruling from the Revenue Agency is mandatory in order to determine the eligible income. In the case of an indirect use of IP, the ruling is optional as the eligible income may be determined by the amount in the agreement concluded between the licensor and the licensee.
Moreover, potential capital gains realized from the sale of qualifying IP could be exempt from taxation, provided that at least 90% of the gain is reinvested in R&D activities.

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