Patent Box: What Opportunities Does It Offer Businesses?

The 2015 Stability Law, in paragraphs 37 through 45, introduced the optional “Patent Box” regime in Italy as well, “Patent Box,” which consists of preferential taxation for income derived from the use and/or sale of “intellectual property, industrial patents, trademarks, as well as processes, formulas, and information relating to legally protectable experience acquired in the industrial, commercial, or scientific fields.”

Compared to the Patent Box scheme adopted in other European countries, the Italian legislature has effectively extended the application of the optional regime to all intangible assets, including know-how and software.

Who is this for?

The Patent Box scheme is available to all business owners, regardless of legal form, size, or accounting regime. It is also available to companies and entities of all types, including trusts—whether or not they have legal personality—that are not resident in Italy, provided they are resident in countries with which Italy has a double taxation agreement in force and with which there is an effective exchange of information.

The following will therefore be eligible for the benefit:

• corporations;
• partnership;
• sole proprietors;
• established Italian organizations composed of individuals residing in white-list countries.

General partnerships, professional associations, and businesses subject to insolvency proceedings are excluded

What is it about?

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

• Software;
• Patents granted or pending;
• Trademarks that are registered or pending;
• Designs and Models;
• Know-how.

When does it start?

The new optional regime applies starting with the tax period following the one in progress as of December 31, 2014. To take advantage of this benefit, effective in 2015, taxpayers must exercise a specific option. This option, which may be exercised starting in 2015, is irrevocable and valid for 5 years. It also applies for IRAP purposes.

How much is the tax exemption?

The portion of income and production value (the option for the preferential tax regime applicable to income derived from the use of intangible assets is relevant not only for determining income for income tax purposes but also for IRAP purposes) that is eligible for the tax break is defined based on the ratio between the research and development costs incurred for the maintenance, the enhancement, and the development of the eligible intangible asset (so-called qualified costs) and the total costs incurred to produce such an asset.

The Decree-Law approved by the Council of Ministers on January 20, 2015, provides for the option of including the purchase costs of eligible intangible assets in research and development expenses, as well as any research costs related to contracts entered into with group companies, up to a maximum of 30% of such costs.

What We Offer

Our firm can work alongside the company’s tax advisor to carry out the following activities in order to secure future benefits under the Patent Box scheme:

• Drafting of legal opinions on the value of IP assets subject to the Patent Box scheme;
• Planning and structuring one's intellectual property portfolio;
• Trademark and software registration, and identification of corporate know-how, with the aim of strengthening the portfolio of intangible assets;
• Collaboration with the tax advisor during the ruling process.