The UK Patent Box Proposal: How Does It Measure Up?

This article comes courtesy of our friends at DLA Piper.

Her Majesty’s Treasury recently released a “Patent Box” proposal that would provide substantial tax incentives for UK companies that derive profits from patents.

While the proposal would make the UK a more desirable location for IP-producing companies, the tax regimes in several neighboring European nations continue to provide better alternatives from a tax minimization perspective. How does the UK proposal measure up to the tax regimes in the Netherlands, Luxembourg, Belgium and Ireland?

The bottom line: comparing effective tax rates

Starting in April 2013, the UK Patent Box proposal would tax profits derived from qualifying patents at an effective rate of 10 percent. This rate is substantially lower than the general corporate tax rate in the UK (scheduled to be 24 percent in April 2013). However, it is still substantially higher than the effective tax rates available in several neighboring European nations. (more…)