Given that there is no withholding tax on IP royalties between Member States within the European Union, we can suggest a number of countries where royalties are particularly advantageous.

CYPRUS
The system of taxation of intellectual property royalties in Cyprus has changed following the recommendations of the Organization for Economic Co-operation and Development (OECD) Action 5 report and the Ecofin Council conclusions published on December 8, 2015. Legislation has been changed to limit the companies that can benefit from research and development (RD) exemptions, but the tax rate in Cyprus is still one of the cheapest in the EU for foreign companies entering Cyprus to use intellectual property want to grant -resident company (intermediary), where this right is then sub-licensed to the end user. Overall, the effective tax on IP royalty income should be less than 2.5%.

IRELAND
In 2015 Ireland introduced an effective corporate tax rate of 6.25% on intellectual property income based on an allowance for research and development costs borne by the company. By linking the two, Irish law encourages companies to conduct RD directly within the EU - leading to intellectual property creation - while discouraging them from licensing without directly committing to RD.

BELGIUM
Belgium has introduced a tax system that benefits those who have income from acquired copyrights. This tax system can have many different applications and can be used to protect works of art as well as a useful tax break for IT developers. Income from license fees for IP rights is taxed at 15%. This income is not taken into account when calculating social security contributions. In addition, these taxes are reduced by 50% on imports due to the application of standard import costs. The first 15,000 euros that a copyright holder earns in a year is therefore taxed at 7.5%, the following 15,000 at 11.25%. This tax system applies to people with a total annual income of up to 56,450 euros.

THE NETHERLANDS
As of 2010, IP income in the Netherlands is taxed at only 5%. Except for patents, there is no income limit. Patent holders can actually have access to this tax system if their share of expected income is between 30 and 70%, taking into account total income from patents and other sources. These rates also apply to foreign companies that own intangible assets or companies that have received research and development accreditation from the Dutch Ministry of Economic Affairs if they hold software IP or trade secrets. The only other limitation of this cheap tax system is that it does not apply to marketing and branding assets.

LUXEMBOURG
In general, corporate tax in Luxembourg is 29.22%, but on income from intellectual property licensing it can be as low as 5.8%. This is due to an 80% corporate tax exemption. Interestingly, this exception also applies to companies that have applied for a patent for use in connection with their own business, which then calculate a notional net income as if they had received the income from the licensing.

ITALY
Italy is a larger market compared to the other countries discussed and can be a very attractive place for a company to invest in research and development, as companies have been able to deduct intellectual property income from their taxable income since 2015. The tax deduction was set at 30% in 2015, 40% in 2016 and 50% from 2017. Companies will therefore enjoy a substantial tax rebate by reducing their taxable income.