The international homologation of the fiscal framework of Andorra is a reality. In effect, in October 2018 the Organization for Economic Co-operation and Development (OECD) approved the regulatory changes implemented in Andorra in recent years and, as a consequence, the special tax regimes that are provided for by the Law on Corporate Tax currently in force in Andorra. We would like to draw your attention to one of these regimes: the “management of certain intangible assets” scheme, also known as patent box.
This regime has been developed as a fiscal incentive that rewards innovation and encourages the creation and exploitation of patents, utility models and computer programmes protected by copyright. Besides its interest for new business projects, it is also a way to promote the internationalisation of Andorran companies and the implementation of companies from all over the world in Andorra.
The main attraction of the Andorran Patent Box is the reduction of up to 80% of the taxable base of the corporate tax. In this regard, considering that the nominal tax rate is 10%, with the implementation of patent box, the effective tax rate can amount to 2% inasmuch as the research and development activity of the company is carried out primarily in the Principality of Andorra. Furthermore, this regime can apply to all kinds of companies and all types of business activity, and is also compatible with other tax benefits and deductions provided for by the Andorran legislation.
Beyond our borders, Ireland was a pioneer in applying the low-tax regimes in order to encourage innovation. The Irish IP-Box has been replaced by Knowledge Development with a 6,25% Corporate Tax. In Spain, the tax rate can amount to 15% (with a 60% reduction of the taxable base, instead of the 25% general tax rate). France also taxes the profits earned from patents and royalties with the 15% tax rate, instead of the 33% general tax rate. In Holland the applicable tax rate is 5%, which is applied to positive net yield. In Belgium, it is known as “PID” (Patent Income deduction) and entails an effective tax rate of 6,8%. In Luxemburg the effective tax rate is 5,76%, in Switzerland and Hungary it is 8%. The United Kingdom introduced the Patent Box Scheme in 2013 has a tax rate of 10%.
Therefore, taking into account that it is a reality that the Principality already has a taxation system in accordance with international standards, it can be stated that its Patent Box regime has become one of the best fiscal environments of the euro zone to encourage innovation, creation and exploitation of patents, as well as utility models and computer programmes, in its territory.
Article by Raül Gonzalez. Gonzalez Advocats