Germany and UK tackle ‘patent box’ tax rules

Wolfgang Schaeuble

Germany and Britain will seek other countries’ backing for a deal to ensure that tax breaks on profits generated from patented research apply only in the country where the research and innovation takes place.

Firms have been keen to relocate some units to take advantage of “patent box” tax breaks.

“Just because something is legal, does not mean it is fair in tax terms,” said German Finance Minister Wolfgang Schäuble.

“Multinationals must contribute their fair share to public budgets, just like any other company.”

The British treasury and German finance ministry said their proposal was based on a principle advocated by the OECD, that tax benefits should be connected directly to local research and development spending.

The two countries were “seeking to achieve a balance between maintaining countries’ ability to offer such regimes and preventing misuse of them”, they said.

Germany has until now granted no “patent box” tax advantages and income from patents and licensed products is generally taxed, like corporate profits, at around 30%. That compares with a rate of around 10% in Britain based on patented research. Countries such as Cyprus and the Netherlands have similar tax breaks. Germany had come under pressure from lobby groups to either introduce its own breaks or ensure a level playing field internationally.

“Preferential tax treatment of intellectual property must be dependent on substantial economic activity,” said Mr Schäuble.

“More and more countries are speaking out against allowing too much leeway for large multinationals to minimise their taxes.”

British Chancellor George Osborne said the deal would protect research while countering aggressive tax avoidance.


These are the nail hues to choose this season, says Katie Wright.Perfectly polished: 5 autumn/winter nail trends you’ll actually want to wear

This early 19th-century table is one of a number of Irish lots at Sotheby’s Style, Furniture and Ceramics sale in New York on Thursday (October 24).Irish lots poised to add bite to Big Apple sale

Something for all at Hegarty’s auction in Bandon, says Des O’SullivanSomething for all at Hegarty’s auction in Bandon

Des O’Sullivan gives a preview of the Irish selection on offer at two sales in DublinPreview of the Irish selection on offer at two sales in Dublin

More From The Irish Examiner