Intellectual property law is a complex field where legal and tax issues intersect. For companies with intangible assets, mastering the tax aspects is crucial to optimizing their strategy. Our expertise lies in specialized business sectors requiring tailor-made legal and tax support.

What is law and intellectual property?

Intellectual property law is a major strategic lever for modern companies, protecting their innovations and creations while generating considerable economic value. In today’s economy, intangible assets account for an average of 80% of the value of CAC 40 companies. This protection encompasses industrial property (patents, trademarks, designs) and literary and artistic property (copyright, neighboring rights).

Patents protect technical inventions for 20 years, such as Sanofi’s pharmaceutical innovations or Airbus’ cutting-edge technologies. Trademarks distinguish a company’s products or services for a period of 10 years, renewable indefinitely, including the logos and distinctive signs of giants such as L’Oréal or LVMH. A particular aspect of this protection is the right to the logo image.

Copyright covers original works for a period of 70 years after the author’s death: software developed by tech companies, artistic creations, editorial content. These intangible assets generate substantial revenues – intellectual property royalties represent several billion euros a year for major French companies – and present specific tax challenges requiring in-depth expertise.

Taxation of intellectual property assets

The tax treatment of intellectual property assets represents a major challenge for companies, not least because of the significant amounts involved and the complexity of the applicable rules. The tax authorities make a strict distinction between assets created in-house and those acquired for valuable consideration, with each category subject to specific tax regimes set out in the General Tax Code.

For patents developed in-house, research and development costs are generally immediately deductible under article 236 of the French General Tax Code. However, if the company chooses to capitalize the patent (valuation in excess of 500,000 euros, for example), it must amortize it over its useful life, generally 5 to 10 years depending on the nature of the innovation. Software developed in-house, on the other hand, is amortized over a maximum of 1 to 5 years.

Trademarks are amortized over their estimated useful life, in accordance with article 39-1-2° of the French General Tax Code. In the absence of a time limit, amortization is carried out over a maximum of 10 years at a rate of 10% per annum. Registration fees (around 250 euros for a French trademark) and renewal fees (350 euros every 10 years) are immediately deductible. Designs follow a similar regime, with amortization over 5 years on average.

Disposals of intellectual property assets are subject to the business capital gains regime set out in articles 39 duodecies et seq. of the French General Tax Code. Companies can spread taxation over three years (for capital gains in excess of 50,000 euros) or reinvest in similar assets to benefit from tax deferral, subject to certain conditions (3 years) and amount.

Tax optimization of intellectual property income

Intellectual property income offers several levers for tax optimization, although the regulatory framework has become considerably tougher with the BEPS (Base Erosion and Profit Shifting) rules. The research tax credit (CIR) remains one of the most advantageous schemes for French companies.

The CIR deducts 30% of research expenditure up to 100 million euros, then 5% above that, with an annual reimbursement ceiling of 20 million euros. Eligible expenses include researchers’ salaries, depreciation of research equipment, and patent acquisition and maintenance costs. This scheme can be supplemented by the innovation tax credit (CII) for SMEs.

Intellectual property royalties benefit from special tax treatment, which requires appropriate structuring. Companies can deduct royalties paid for the use of patents, trademarks or know-how, provided they comply with the arm’s length principle. Conversely, royalties received constitute taxable income, but may benefit from preferential regimes in certain jurisdictions.

Structuring via intellectual property holding companies remains a viable strategy, particularly in jurisdictions such as Luxembourg, the Netherlands and Ireland, which have adapted their post-BEPS regimes. These structures make it possible to centralize the management of intangible assets, while optimizing the group’s overall tax burden.

With regard to the localization of intellectual property assets, optimization opportunities have been restricted since the BEPS rules and the European Anti-Tax Avoidance Directive (ATAD) came into force. Companies must now demonstrate real economic substance in the jurisdictions in which they operate, and comply with new transfer pricing requirements, notably the functions, assets and risks (FASR) approach.

Intellectual property tax litigation

Tax audits on intellectual property are on the increase. In particular, the tax authorities are examining the valuation of intangible assets and intra-group transfer pricing.

The main control points concern the justification of transfer prices between related entities, the reality of research services invoiced, and the consistency between the accounting and tax valuation of assets.

In the event of a tax reassessment, companies can challenge the assessments before the administrative courts. The expertise of a specialized tax lawyer is essential to effectively defend the positions adopted.

Transfer pricing documentation and a solid business case are the best protection against tax reassessments. This preventive approach enables us to anticipate questions from the tax authorities and secure our legal and tax arrangements.