On July 30th 2014 the Higher Administrative Court of Luxembourg (Cour Administrative) ("the Higher Court") issued a decision ("Decision 33148C") on the application of the Luxembourg intellectual property tax regime that grants a 80% tax exemption of the income deriving from qualifying intellectual property rights ("IP").

This decision was issued following an appeal filed by the Luxembourg government against the decision of the Lower Administrative Court (Tribunal Administratif) of June 27th 2013. For details of this decision please refer to our newsletter of September 2013.

In the case at hand, a Luxembourg company ("the Company") was selling, since its incorporation in 1994, products under its own trademark, the registration of which had only been made in 2008. The Court had to decide which date is decisive for the determination of the date of creation of the IP considering that the IP regime is only available for IP created after December 31st 2007.

The Higher Court confirmed that the date of creation of a trademark under Article 50bis (4) of the Luxembourg Income Tax Law ("LIR") is the date of its registration.

The Higher Court however overruled the decision of the Lower Administrative Court on the basis that not all the other conditions of article 50 bis LIR were met.

The Company had entered into a license agreement with a sister company three days after the registration of the trademark. Significant royalties were agreed between the parties for the use of the trademark. However the sister company's activities were limited to affixing the trademark on goods sold exclusively to the Company. The Higher Court considered that this was not an effective "use of the trademark" and that therefore the royalties were not paid for the use of an IP. The Higher Court therefore decided that the royalties paid to the Company do not qualify for the partial tax exemption provided under the Luxembourg IP tax regime.

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