Tax accounting research on corporate investment: A discussion of the impact of IP box regimes on the M&A market by Bradley, Ruf, and Robinson (2021)

IP box effects in the gaming industry

“…On the one hand, demanding nexus limits the investment response, while on the other hand, it requires actual activity in exchange for tax benefits. Consequently, the nexus requirements have been a primary way for governments to regulate the amount and type of IP box benefits they provide (Lester, 2021), among others, in Poland. Thereby it affects cross-border tax competition.…”

“…These tax regimes enable companies to reduce the tax rate on income emerging from patents, licenses, and other forms of intellectual property (Evers, Miller, & Spengel, 2015; Merrill, 2016). Intellectual property box regimes are considered back-end or output-based incentives that offer entrepreneurs reduced taxation on income earned from a successful innovation (Lester, 2021). The scope of the tax base and the preferential tax rate resulting from the IP box varies between countries ranging from 4.4% in Belgium to 13.9% in Italy, and an exemption of qualified intellectual property income from 50% to 80% (Chen, De Simone, Hanlon, & Lester, 2019).…”

Do gaming companies benefit from the IP Box tax rate? Multinational, Polish and Wielkopolskie voivodeship perspective

“…IP Box tax regime allows reducing the tax rate subject to the income from intellectual property rights (Evers et al 2015, Merrill 2016. This tax regime is called a back-end preference, meaning that companies benefit from it at the end of their R&D process cycle (successful commercialisation of the developed innovative results is needed) (Lester 2021). It is crucial to note that the IP Box regime should be constructed in line with the Modified Nexus Approach proposed by OECD within BEPS (Base Erosion and Profit Shifting) rules (OECD 2015).…”

“…Over the last 20 years, 14 out of 27 European countries have applied IP Box regimes to enable firms to cut the tax rate on income earned from successful innovation (Lester 2021) emerging from various forms of intellectual property (Evers et al 2015, Merrill 2016. Because multinational enterprises have more opportunities to reap tax benefits than domestic firms (Karkinsky, Riedel 2012).…”

“…Results obtained by Gaessler et al (2021) call into question whether the IP box is an effective instrument for encouraging innovation in a country rather than simply preventing or facilitating the shifting of corporate income to low-tax jurisdictions. However, nexus rules reduce firms' incentives for acquiring developed intangibles and, by extension, reduce the number of Mergers and Acquisition activity as it requires actual action in exchange for tax benefits (Lester 2021), among others, in Poland.…”