S.L. 123.194 Art. 4Calculation of PatentBoxRegime deduction. ) IP

(1) The Patent Box Regime deduction shall be calculated on the basis of the following formula:

( Qualifying IP Expenditure 95% x x Income or Gains derived from qualifying Total IP Expenditure

(2) The income or gains which shall be taken into account for the purpose of determining the income or gains derived from qualifying IP referred to in sub-rule (1) shall comprise the total income falling within the purport of articles 4 or 5 of the Act and which is derived from the use, enjoyment and employment of the qualifying IP, royalty or similar income whether this is embedded in the consideration for the sale of goods and, or services or otherwise, advances and similar income derived from the qualifying IP, any sum paid for the grant of a licence or similar empowerment to exercise rights under qualifying IP, compensation for infringements in respect of qualifying IP whether such compensation is granted through judicial means or otherwise, gains on disposal of qualifying IP and such other similar or related income as is derived from the qualifying IP and as being calculated after deducting such expenditure, whether of a capital nature or otherwise, as is deductible from income derived from the qualifying IP:

Provided that in all cases, the determination of the above-mentioned income or gains shall be made on the basis of a Transfer Pricing method which is appropriate for this purpose in terms of the OECD’s Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations.

(3) "Total IP Expenditure" comprises expenditure directly incurred in the acquisition, creation, development, improvement or protection of the qualifying IP, being the sum of:

(a) all expenditure actually incurred by the beneficiary and constituting qualifying IP expenditure and any other expenditure incurred by any other person which would constitute qualifying IP expenditure had it been incurred by the beneficiary, including, for the avoidance of doubt, those referred to in rule 5(1)(b); and

(b) acquisition costs and expenditure for outsourcing activities made to related parties.