The formula in one sentence
Effective burden = standard corporate tax rate × (1 − notional deduction). At 15% and an 80% deduction: 0.15 × 0.20 = 0.03, i.e. 3% on fully qualifying IP profit. The nexus fraction can push that rate up if part of the development is not own work or independent third-party work. Capital gains on a sale of qualifying intangibles can be treated differently; that is a separate review point, not a blanket promise.
Example: qualifying IP profits only
€100,000 of fully qualifying IP profit. Deduction €80,000. Taxable €20,000. 15% of that = €3,000. Effective rate 3%. The IP Box calculator reproduces this when you set non-qualifying income to zero.
Example: a blended rate
€60,000 qualifying IP profits and €40,000 other taxable profits. IP slice: 3% of €60,000 = €1,800. Other slice: 15% of €40,000 = €6,000. Total tax €7,800 on €100,000 = 7.8%. The blend sits between 3% and 15%, so profit allocation moves the result, not the headline rate.
What the arithmetic does not replace
Without a qualifying asset, nexus and documentation the formula is academic. It only shows the mechanic if the conditions bite. Sources and statutory cites must be held against the primary text.
Last updated:
This article is general information and does not replace legal, tax or investment advice in any individual case.