How Patent Boxes Impact Business Decisions
As with every change in tax policy, there are trade-offs. The Modified Nexus Approach adds an additional layer of complexity to the already complex issue of taxing IP income. Linking tax breaks for IP income to its associated R&D activity has changed the game and will likely result in some businesses restructuring and relocating their IP assets and R&D activity. Effective tax rates on IP income will likely play an important role in determining optimal locations, giving measures such as R&D credits more importance. Whether this new approach to IP taxation will impact profit shifting and which countries will be the winners and losers is yet to be seen.
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