Compatibility of IP Box Regimes with EU State Aid Rules and Code of Conduct

Abstract

The European Commission has recently started examining Member States' IP box regimes under the both the (soft law) rules of the Code of Conduct on Business Taxation as well as the (hard law) state aid provisions. However, as the scope and interpretation of these rules are unclear and subject to debate, determining whether an IP box regime actually falls foul of these rules is not straightforward. In view of the European Commission's scrutiny, light must urgently be shed on this issue. In this article, the author has tried to address this compatibility query. In a first part, the characteristics of a 'generic' IP box regime are described. In a second part, the state aid provisions and rules on harmful tax competition (Code of Conduct on Business Taxation) are successively discussed. On the basis of that discussion, the author has tried to provide a framework to assess whether and to what extent IP box regimes are compatible with these rules. It is concluded that a well-designed IP box regime may pass the EU rules on state aid and harmful tax competition.