New 2019 French Patent/Software box regime: taxation at a reduced rate of 7%

By Emmanuelle Porte


A new preferential taxation regime for income generated by industrial property and software will be adopted as from 1 January 2019, subject to the definitive vote on the draft 2019 Finance Act.

This new regime, applicable either to types of intangible assets or to a family of products or services, should provide taxation at a reduced rate of 7% of net income generated by industrial property including patents and non-patented patentable inventions and also copyrighted software. The inclusion of software constitutes the major change to the taxation regime. The net income basis subject to a reduced rate of 7%, vs 31% in 2019, will take into account the research costs (which could also qualify for the Research Tax Credit) and a percentage determined from the “nexus” approach (i.e. ratio between the qualified costs and the total costs including the purchase cost). This new regime also involves a detailed documentation that should be provided to the French Tax Authorities the first day of the tax audit under a penalty corresponding to 5% of income generated from the non-documented intangible asset.