Innovation for a New Tax Incentive: Patent Box Regime Turkey and the EU Application

Abstract

Countries make reductions in direct tax rates to attract foreign investments. In order to avoid this situation leading to an unfair tax competition, instead of decreasing the corporation tax wholly, tax incentives for industrial property rights which contribute innovation are prefered. The dynamism of industrial property rights is higher compared to the other production factors and it is more susceptible to tax incentives. Lately, countries have begun tax incentive applications called either “patent box regime” or “innovation box regime” in order to attract innovative international companies to themselves. For the first time in 1973, “patent box regime” began to be implemented in Ireland and spread rapidly. In this content, this application was entered into force in such counties: France (2000), Hungary (2003), Belgium and the Netherlands (2007), Spain, Luxembourg and China (2008), Malta (2010), Liechtenstein (2011), England (2013), Portugal, Italy and Turkey (2014). Patent box regime is a promoting factor which proposes low taxation for the earnings from directly commercialized patents and from the other industrial property rights. In addition, its structure is result-oriented and incites innovation. In this study, “patent box regime”, a kind of a tax incentive which is provided by the countries in order to enhance their international competitive capacities in the field of innovation, will be examined. In this content, the applications in Turkey and in the European Union will be discussed comparatively and potential difficulties in the application will be mentioned.