Cross-border IP structuring for the EIC: a Canada and Netherlands case study

1. Is this for you?

This framework is written for Canadian deep tech founders preparing to access European funding or investors. If you tick most of the boxes below, the rest of this document applies to you. If not, the actions described here are premature, and your priority should be the prerequisites first.

• My company (or its founders) owns the core IP outright. If a university or research institution holds rights, I have read the underlying tech transfer agreement.
• I know whether my university tech transfer agreement requires consent, notice, or revenue share for downstream licensing or assignment.
• I claim Canadian R&D tax credits (SR&ED) and want to preserve eligibility.

If most of the above are yes, read on. If your university IP situation is unclear, resolve that first. It is the single most common blocker we see in cross-border IP structuring, and it can invalidate otherwise clean advice.

2. The Core Tension

European investors and the EIC need the entity they fund to have genuine commercial substance: local jobs, local R&D, local revenue, and IP rights enforceable in the EU. They also need compliance with Horizon Europe rules. Grant-funded results must be owned by the EU subsidiary, and the European Commission can object to the transfer of those results to non-associated countries. Canada is non-associated.

Canadian founders need the opposite reflex. Keep IP in Canada to preserve global control, protect SR&ED eligibility, and avoid triggering deemed-disposition tax under Sections 69 and 247 of the Income Tax Act.

These needs are not actually in conflict. The structure below resolves the tension.

3. The Recommended Structure: Exclusive License

How EIC eligibility actually works

Under Article 22 of the Horizon Europe Regulation, an EIC Accelerator applicant must be a legal entity established in an EU Member State or a country associated with Horizon Europe. For Canadian companies, the rule is satisfied by incorporating an EU subsidiary that becomes the applying entity.

Because the Canadian Parent holds all existing IP, the subsidiary needs adequate access to that background IP to perform the project and develop new results (foreground IP). This is arranged through an intercompany license agreement between the Canadian Parent and the European subsidiary.

Effective establishment is more than registration. The EIC also evaluates whether the entity has the substance and skills to execute the project in Europe, including hires, R&D activity, and leadership presence appropriate to the project scope. HQ contributors who work on the project locally can be placed on the subsidiary's payroll for the duration of their contribution.

What it is

The Canadian parent retains ownership of all existing IP. The EU subsidiary receives an exclusive, perpetual, irrevocable, sub-licensable license to commercialise the technology. IP stays in Canada. European commercial rights live in the subsidiary.

What about IP generated under the EIC grant?

Under Article 38(1) of the Horizon Europe Regulation, the European subsidiary, as beneficiary, owns the results (the new foreground IP) it generates. This is non-negotiable.

As owner of the foreground IP, the subsidiary is also bound by an exploitation obligation under Article 39(1) and the model Grant Agreement: it must use its best efforts to exploit the results, either directly or through transfer or licensing to another entity, including the Canadian Parent on an exclusive basis.

The Canadian Parent can therefore access foreground IP through a royalty-bearing license-back, structured to comply with Horizon Europe transfer restrictions.

The Commission notification requirement

Because the Canadian Parent is established in a non-associated third country, an exclusive license to it triggers the European Commission's right to object. The EU subsidiary must notify the Commission before signing the exclusive license agreement, providing:

• The specific results (foreground IP) concerned.
• A detailed description of the license and the planned exploitation.
• A reasoned assessment of the impact on EU interests, in particular regarding competitiveness, ethical principles, and security.

The Commission has 60 days from notification to object.

Strategic consideration. Because the Canadian Parent is identifiable from the outset, it is generally advisable to address this point proactively. Beneficiaries can formally request the Commission to waive its right to object in respect of exclusive licensing to a specifically identified third party.

The investor protections that make it bankable

A exclusive license alone is not enough for sophisticated investors. The license should be paired with a small set of structural protections in the shareholders' agreement:

• Veto rights. The subsidiary cannot amend or terminate the IP license, transfer locally-developed IP to the parent, or change royalty rates without investor consent.
• Anti-upstreaming. Intercompany payments to the parent are capped as a percentage of net revenue, and locked until defined milestones are met.
• Springing IP assignment. Background IP automatically transfers to the EU subsidiary on trigger events such as parent insolvency, hostile change of control, or material uncured breach.
• Transfer pricing controls. All intercompany transactions take place at arm's length per OECD Guidelines.
• Technology escrow. Source materials and know-how deposited with an independent escrow agent.

4. Where to Land in Europe

Most Canadian deep tech companies entering Europe choose between the Netherlands and France. Both work. The right answer depends on where your talent, partners, and lead investors are, not on tax alone.

Netherlands

• Innovation Box. Qualifying IP-derived profits taxed at ~9%, versus the standard 25.8% corporate rate.
• Expat scheme (the "30% ruling"). Qualifying inbound talent receives a flat 27% for new hires from 1 January 2027.
• Participation exemption. Dividends and capital gains from qualifying subsidiaries are generally exempt.
• BV mechanics. No minimum share capital, limited liability, English working language.

France

• Crédit d'Impôt Recherche (CIR). 30% R&D tax credit on qualifying expenditure.
• IP Box regime. Qualifying IP income taxed at 10%.
• Régime des impatriés. Inbound talent regime exempting ~30% of salary, up to eight years.
• Deep tech ecosystem. Strong public co-investment via Bpifrance and active deep tech VC base.

5. Before You Engage Counsel

Have the following ready before booking time with an IP lawyer or tax advisor. Counsel hourly rates spent on document gathering is counsel rates wasted.

• IP audit. Every patent, application, trademark, and key trade secret with jurisdiction, owner, status, and encumbrances.
• University tech transfer agreement. Read the assignment, licensing, and change-of-control clauses.
• Cap table and shareholders' agreement. Flag any consent rights or IP-related restrictions on the parent.
• Government funding history. Cumulative non-equity support over €4M in three years can trigger EU Foreign Subsidies Regulation review.
• Working preference for EU subsidiary location. Based on talent, partners, and investor geography.

6. What Comes After

Timeline & cost

For an exclusive license, end-to-end execution is typically 2 to 4 weeks from term sheet to signed agreements once counsel is engaged, and only are incurred upon winning the EIC Accelerator.

• Initial legal. €10–25k for the intercompany license, SHA amendments, and template intercompany terms.
• Tax and transfer pricing setup. €5–15k for an initial transfer pricing study and Canadian-side tax review.
• Recurring compliance. ~€5–15k per year for transfer pricing review, intercompany reporting, and foreground IP register maintenance.

Costs are eligible under the EIC grant's IP management line items.

Exit and acquisition

A clean exclusive license structure typically simplifies acquisition diligence: the EU subsidiary is a self-contained commercial entity with clear, enforceable IP rights. Acquirers may push for full IP consolidation post-close.