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France IP & Patent Box Tax Guide

French intellectual property taxation. The guide covers: the patent box regime (the "régime des brevets" — the reduced tax rate on IP income) — the French patent box regime is one of the most favourable in the EU; the net income from the qualifying IP assets (the "produits de la propriété industrielle") is taxed at the reduced rate of 10% (instead of the standard corporate tax rate of 25%); the qualifying IP assets include: (a) the patents (the "brevets") — the patents granted by the French Patent Office (the "INPI — Institut National de la Propriété Industrielle") or the European Patent Office (the "OEB"), (b) the patentable inventions (the "inventions brevetables") — the inventions that are patentable but not yet patented, (c) the supplementary protection certificates (the "certificats complémentaires de protection" — the CCP), (d) the plant variety certificates (the "certificats d'obtention végétale" — the COV), (e) the software copyrights (the "droits d'auteur sur les logiciels") — only for the software that is protected by the patent (the "logiciel breveté") or the software that is part of a patented invention; the eligible income includes: (a) the royalties (the "redevances") received from the licensing of the IP assets, (b) the capital gains (the "plus-values") on the sale of the IP assets, (c) the embedded IP income (the "revenus incorporés") — the income from the products or the services that incorporate the IP assets (the "produits incorporant la propriété intellectuelle"); the net income is calculated as: the gross IP income minus the directly attributable costs (the "frais de recherche et de développement" — the R&D costs, the patent filing costs, the maintenance costs, the legal costs); the net income is taxed at the reduced rate of 10% for the corporate tax (IS) and the surtax (the "contribution sociale sur l'IS" at 3.3% and the "contribution exceptionnelle" at 10.7% for the large companies); the nexus approach (the "approche au prorata" — the OECD modified nexus approach) — the French patent box regime follows the OECD modified nexus approach; the reduced rate applies only to the IP income that is proportionate to the R&D expenditure incurred by the taxpayer in France (the "dépenses de R&D engagées en France"); the nexus ratio is calculated as: (the qualifying R&D expenditure incurred by the taxpayer) / (the total R&D expenditure incurred by the taxpayer + the cost of the outsourced R&D + the cost of the acquired IP); the nexus ratio ensures that the patent box regime benefits only the companies that perform the substantial R&D activities in France; the IP holding structures — the French companies can hold the IP assets directly or through the IP holding companies (the "sociétés de détention de brevets"); the IP holding company can license the IP assets to the operating companies (the "sociétés d'exploitation") and benefit from the reduced rate of 10% on the royalty income; the IP holding company must have the substance in France (the "substance économique" — the staff, the premises, and the management in France); the capital gains on the IP sale — the capital gain on the sale of the patent (the "cession de brevet") is taxed at the reduced rate of 10% (the same as the patent box regime) if the patent is held for at least 2 years; the capital gain on the sale of the other IP assets (the "marques, dessins et modèles") is taxed at the standard corporate tax rate (25%); the withholding tax on the outbound royalties (the "retenue à la source sur les redevances") — the royalties paid by the French company to the foreign licensor are subject to the withholding tax at 33.33% (reduced by the tax treaty); the royalties paid to the EU licensor are exempt from the withholding tax under the EU Interest and Royalties Directive (the "directive intérêts et redevances") if the licensor is a related company (holding at least 25% of the French company). All amounts in Euros (EUR). For related reading, see our Corporate Tax Guide → and Holding Companies Guide →.

Qualifying IP Assets

  • Patents and CCP: The patents granted by the INPI (the "Institut National de la Propriété Industrielle") or the European Patent Office (the "OEB"). The supplementary protection certificates (the "CCP") for the pharmaceutical products. The patentable inventions (the "inventions brevetables" — the inventions that can be patented but are not yet the subject of a patent application).
  • Software copyrights: The software copyrights that are protected by a patent (the "logiciel breveté") or the software that is part of a patented invention. The standalone software copyrights (the "droits d'auteur sur les logiciels non brevetés") do NOT qualify for the reduced rate (the standard corporate tax rate applies).
  • Plant variety certificates: The COV (the "certificats d'obtention végétale") — the plant variety rights granted by the INPI or the Community Plant Variety Office (the "CPVO"). The COV are treated as the patents for the patent box regime.

For the R&D tax credits (the CIR and the CII) that may apply to the development of the IP assets, see our Research & Innovation Tax Guide →.

Nexus Ratio Calculation

  • Nexus fraction: The reduced rate of 10% applies only to the proportion of the IP income that is linked to the taxpayer's own R&D. The nexus ratio = (the qualifying R&D expenditure) / (the total R&D expenditure + the outsourced R&D costs + the cost of the acquired IP). The taxpayer must maintain the detailed records (the "documentation nexus") to demonstrate the nexus ratio.
  • Uplift (30%): The taxpayer can include an uplift of 30% of the qualifying R&D expenditure in the numerator (the "majoration de 30%") — the uplift covers the costs of the outsourced R&D and the acquired IP up to 30% of the qualifying R&D expenditure. The uplift cannot exceed the total amount of the outsourced R&D and the acquired IP costs.

For the IP holding structures and the substance requirements, see our Holding Companies Guide →.