The OECD's Nexus Approach to IP Boxes: A European Union Law Perspective
30 Pages Posted: 9 Apr 2015
Date Written: 2015
IP boxes or patent boxes can be introduced so as to promote research and development (R&D) activities or attract mobile IP assets, but they can also cause harmful tax competition. Action 5 of BEPS project has analysed this problem and proposes the application of a ‘nexus approach’ that aligns R&D expenditures with the conferment of tax benefits. If this nexus approach is adopted by EU member states, they will have to respect state aid rules and fundamental freedoms. This paper analyses the OECD's nexus approach, the Anglo-German joint statement proposing a ‘modified nexus approach’, and the Italian IP box. The compatibility with EU law of all three and their likeliness to prevent harmful tax competition is assessed.
Keywords: BEPS, IP boxes, tax competition, state aid, freedom to provide services, freedom of establishment
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