Patent Box: What Opportunities Does It Offer Businesses?

With the 2015 Stability Law, paragraphs 37 to 45 also introduced in Italy the optional "Patent Box" regime. This regime consists of a preferential tax regime for income deriving from the use and/or sale of "intellectual works, industrial patents, trademarks, as well as processes, formulas, and information relating to experience acquired in the industrial, commercial, or scientific fields that are legally protectable."

Compared to the Patent Box adopted in other European countries, the Italian legislator has effectively extended the application of the optional regime to all intangibles and therefore also to know-how and software.

Who is it for?

The Patent Box is open to all business owners, regardless of legal form, size, or accounting regime. Companies and entities of all types, including trusts, with or without legal personality, that are not resident in Italy, may also benefit from it, provided they are resident in countries with which a double taxation agreement is in force and with which the exchange of information is effective.

Therefore, the following will be able to benefit from the concession:

• joint stock companies;
• partnerships;
• individual entrepreneurs;
• permanent establishments of Italian entities resident in white-listed countries.

Simple partnerships, professional associations and companies subject to bankruptcy proceedings are excluded.

What is it about?

The tax relief applies to income derived from the use and/or sale of "intellectual property, industrial patents, trademarks, designs, and models, as well as legally protectable processes, formulas, and information relating to experience acquired in the industrial, commercial, or scientific fields." The Patent Box therefore applies to:

• Software;
• Patents granted or pending;
• Registered or pending trademarks;
• Drawings and Models;
• Know How.

From when it starts

The new optional regime applies from the tax period following the one ending on December 31, 2014. To benefit from the relief, effective from 2015, a specific option must be exercised. The option, exercisable from 2015, is irrevocable and valid for five years. It also applies to IRAP (regional business tax) purposes.

How much is the tax exemption?

The portion of income and production value (the option for the preferential tax regime for income deriving from the use of intangible assets is relevant not only for the determination of income for income tax purposes but also for IRAP purposes) that can be subject to the benefit is defined on the basis of the ratio between the research and development costs incurred for the maintenance, growth and development of the eligible intangible asset (so-called qualified costs) and the overall costs incurred to produce that asset.

The decree approved by the Council of Ministers on January 20, 2015, provides for the possibility of including in research and development costs the purchase costs of eligible intangible assets, as well as any research costs relating to contracts stipulated with companies belonging to the group, up to a maximum of 30%.

What we offer

Our firm can assist the company's tax advisor in carrying out the following activities to obtain the future benefits of the Patent Box:

• Drafting legal opinions on the value of IP assets subject to Patent Box;
• Planning and setting up your IP asset portfolio;
• Registration of trademarks, software and identification of company know-how with the aim of strengthening the intangibles portfolio;
• Collaboration with the tax advisor in the ruling process.