Luxembourg exempts 80% of qualifying IP income, about 4.8% in Luxembourg City; the Dutch innovation box taxes it at 9%. Both cover patents and copyrighted software, never trademarks, and both limit the benefit to the share of R&D the company did itself or bought from unrelated parties. Smaller Dutch taxpayers enter with an R&D declaration. Groups above EUR 750 million turnover are topped up to 15%.
What an IP box actually does
An IP box is a reduced tax rate on profit that comes from intellectual property the company has developed itself, such as patented technology or copyrighted software. The company pays normal corporate tax on everything else. In Luxembourg 80% of the qualifying income is exempt, which brings the effective rate to about 4.8%; in the Netherlands qualifying income is taxed at 9% instead of 25.8%.
The benefit is not automatic. Since the OECD agreed common rules in 2015, every European IP box follows the nexus approach: the reduced rate applies only in proportion to the research and development the company did itself, or paid unrelated contractors to do. If the code was written by a sister company in another country, or the patent was bought, the qualifying share drops sharply.
In practice that means an IP box rewards a real development team in Luxembourg or the Netherlands. A holding company that simply owns software rights while the developers sit elsewhere gets little or nothing, and transfer pricing rules will usually push the profit back to where the developers are.
Luxembourg IP box and Dutch innovation box
| Luxembourg | Netherlands | |
|---|---|---|
| Effective rate | About 4.8% (80% exemption) | 9% |
| Qualifying IP | Patents, utility models, copyrighted software | Patents, plant breeders' rights, software and other innovations under an R&D declaration |
| Entry ticket | Own R&D under the nexus rules | R&D declaration (WBSO) for smaller taxpayers; patents for larger ones |
| Smaller taxpayer rule | n/a | Turnover under EUR 50 million and IP income under EUR 37.5 million over 5 years |
| Gains on sale | Exempt in the same proportion | Taxed at 9% within the box |
| Trademarks | Excluded | Excluded |
Both boxes reward the company that writes the code, not the one that owns it on paper.
The nexus fraction decides everything
- Own R&D counts in full. Work by the company's own staff and by unrelated contractors is qualifying.
- Group R&D does not. IP developed by related companies or bought in reduces the fraction; a 30% uplift partly compensates.
- Track it. Both countries expect R&D costs tracked per asset or product family.
- Substance. Developers, product decisions and budgets in the country; a holding that only owns IP gets nothing.
- Pillar Two. Groups above EUR 750 million turnover face top-up tax below 15%.
Who should look at an IP box, and who should not
Software companies with their own developers, medtech and engineering firms with patents, and scale-ups that are profitable and growing are the natural candidates. In the Netherlands smaller companies, with turnover under EUR 50 million, can enter the innovation box with an R&D declaration (WBSO) instead of a patent, which makes it accessible for software start-ups.
Large groups, with consolidated turnover of EUR 750 million or more, are in a different position. Under the global minimum tax, their effective rate in each country is topped up to 15%. An IP box below that rate mostly shifts tax from one country to another rather than saving it.
A Luxembourg software company earns EUR 1 million of profit from its own platform, written by its own team. Under the IP regime it pays about EUR 48,000 of tax instead of about EUR 239,000. A Dutch company in the same position pays EUR 90,000 instead of EUR 258,000. If half of the code had been written by a related company abroad, the benefit in both countries would roughly halve.
Calculate your IP box tax
Indicative: profit treated as entirely IP income; Dutch tax at 25.8% outside the box.
IP box calculator: Luxembourg vs Netherlands
Enter your IP profit and how much of the R&D you did yourself. You get the tax in both countries.
80% exemption in Luxembourg City.
Innovation box rate.
Group and bought-in IP dilute it.
Pillar Two tops it up.
IP boxes in Luxembourg and the Netherlands: frequent questions
What is the Luxembourg IP box rate in 2026?
Luxembourg exempts 80% of qualifying net IP income, so with the 23.87% combined rate in Luxembourg City the effective rate is about 4.8%.
What is the Dutch innovation box rate?
9% on qualifying profits from innovation, against the normal 25.8% top corporate tax rate.
Does software qualify?
Yes, copyrighted software qualifies in both countries if it results from the company's own R&D. Trademarks and marketing intangibles never qualify.
What is the nexus approach?
The benefit is limited to the share of R&D the company performs itself or outsources to unrelated parties. IP bought in or developed by group companies reduces the qualifying share.
Do IP boxes survive the 15% global minimum tax?
For groups with EUR 750 million turnover or more, an effective rate below 15% can be topped up under Pillar Two, which largely neutralises the IP box. Smaller companies keep the full benefit.