Tax Alert - French IP Box - The first comments of French Tax authorities on the new French IP Box regime have been released for public consultation until 15 September 2019

By Laurence Clot, Alexandre Polak, Thibaut Hubert


The French tax Authorities’ comments regarding the new regime of the industrial property have been released for public consultation until the 15 of September 2019. They mainly concern patents, software and the computation of expenses to be deducted or excluded when determining the net income subject to the favorable regime (taxation at 10% rate).

First, patents and utility certificates in the process of being granted can benefit from the favorable regime, unlike plant variety certificates in the process of being granted.

Then the software eligible for the special regime is defined as all instructions, programs, processes and rules, as well as any associated documentation and preparatory design material, relating to the information treatment system.

An indicative list of expenses to be retained or excluded for the determination of the net result subject to the special regime has been provided by the French Tax authorities.

Companies are authorized, on an optional basis, to spread the tax deduction over the depreciation period applicable to capitalized expenses.

Thus, regarding the first financial year related to income arising from an eligible asset or group of assets companies must deduct R&D expenses incurred earlier during the financial years opened as from the financial year the option has been exercised.

With regard to the computation of the "nexus" ratio, all expenses should be taken into account in respect of the financial year they are incurred, even if they have been capitalized.

Finally, in case of tax consolidated group, when R&D expenses are recharged to a company of the group receiving the revenues, such expenses should only be taken once up to the amount recharged, both for the determination of net income and for the nexus ratio of the group.