New 2019 French Patent/Software box regime: taxation at a reduced rate of 10%

A new preferential taxation regime for income generated by industrial property and software is applicable since January 1, 2019.

This new regime, applicable either to types of intangible assets or to a family of products or services, provides taxation at a reduced rate of 10% of net income generated by industrial property including patents and non-patented patentable inventions (for European SME only) and also copyrighted software. The inclusion of software constitutes the major change to the taxation regime.

The net income basis subject to a reduced rate of 10%, vs 31% in 2019, takes into account the research costs (which could also qualify for the Research Tax Credit) and a percentage determined from the “nexus” approach (i.e. ratio between the qualified costs and the total costs including the purchase cost).

This new regime also involves a detailed documentation that should be provided to the French Tax Authorities the first day of the tax audit under a penalty corresponding to 5% of income generated from the non-documented intangible asset.