Identifying IP Box eligible assets within an SME group

The situation

Our support

1. 01

   Mapping the group’s intangible assets

   We listed the assets held and used by the various companies:

   • the brand and its variations;
   • the domain names;
   • the software and its various modules;
   • the databases;
   • the technical processes;
   • the documentation and know-how;
   • any patents or industrial property titles.

   This mapping made it possible to distinguish the assets that may benefit from the IP Box regime from those that are excluded from it.

   The brand, although essential to the group’s commercial value, is not eligible for this regime. The IP Box concerns, in particular, patents, certain industrial manufacturing processes, plant variety certificates and original software protected by copyright.

   Point of attention. Not all intangible assets fall within the IP Box. The brand may be a major strategic asset without, as such, giving rise to the reduced rate.
2. 02

   Identifying and documenting the eligible software

   Our analysis showed that part of the value created by the group came not only from the brand, but also from software developed gradually by its teams.

   We supported the group in order to:

   • trace the various phases of development;
   • identify the employees and providers who took part in the work;
   • document the technical and functional choices specific to the software;
   • establish its original character and its protection by copyright;
   • determine the company that legally owns the rights;
   • attach the research and development expenditure to each asset or family of assets;
   • identify the income directly linked to its exploitation.

   For software, eligibility requires, in particular, being able to establish its originality. The technical elements, the architecture choices, the source code and the formalisation of the work all contribute to this demonstration.

3. 03

   Separating brand income from eligible income

   The contracts entered into by the group provided for an overall fee covering use of the brand, access to the software and various support services.

   We therefore worked on splitting the flows between:

   • the royalty relating to use of the brand, taxed under ordinary rules;
   • the portion corresponding to the licensing of the software, which may fall within the IP Box;
   • the maintenance, hosting, training or support services, which are not eligible for the reduced rate.

   Where a contract provides for an overall price covering eligible and non-eligible elements, the company must determine the portion of the price corresponding to the eligible assets using a suitable and documented method.

   We also reviewed the intra-group agreements in order to specify the rights granted, the recipient companies and the methods for determining the royalties, consistently with the functions actually performed and the risks borne by each entity.

4. 04

   Implementing and securing the IP Box election

   Finally, we calculated the net income that may benefit from the regime, by matching:

   • the software licensing income;
   • the research and development expenditure directly attributable to that asset;
   • the expenditure carried out in-house or entrusted to providers;
   • the Nexus ratio reflecting the share of R&D actually borne by the company.

   The IP Box makes it possible, by election, to apply a 10% rate to the net income from the disposal, licensing or sub-licensing of the eligible assets. The regime is based on the Nexus approach, which establishes a link between the tax benefit and the R&D activities carried out by the company.

   Our support also covered:

   • the choice of the level of election, asset by asset or by family of assets;
   • the preparation of the tax calculations;
   • the drafting of the supporting documentation;
   • the setting up of annual monitoring of income and expenditure;
   • coordination with the accounting, legal and operational teams.