Cyprus IP Box

We also offer Nominee and Management Services (Substance requirements) along with bank account opening and international tax planning.
Cyprus Intellectual Property

Intellectual Property (IP) can be one of the most valuable assets of an organization. Choosing the right location for the centralization and management of IP is a very important strategic business decision. The ideal location to establish an IP structure is one that can serve the organization's business strategies/model, safeguard and protect its IP and contribute to its tax optimization.

Overall Cyprus IP Box regimes provides an effective tax rate of 2.5% - the lowest in the EU! By exempting from corporation tax the 80% of royalty profit, the other 20% of the IP income after deducting all costs relating to the generation of the income is subject to 12,5% corporate tax. Applying the Cyprus corporate income tax rate of 12.5% produces an effective tax rate of 2,5% of the net income.

Practical Example - Taxation of Royalty Income

A Cyprus tax resident company derives royalty income amounting to €100.000 and incurs directly related expenses of €40.000. Under the IP Regime the royalty income will be taxed as follows:

This rate compares very favorably with the competition: the United Kingdom's optional new "patent box" regime gives an effective rate of 10% on relevant income. The Luxembourg and Netherlands schemes are somewhat better, with effective tax rates of 5.76% and 5% respectively, but they are both considerably less beneficial than Cyprus.

Cyprus IP Regime Summary

  • 80% tax exemption on profits derived from the use or sale of IP
  • Competitive amortization provision over a 5 year period
  • Effective Tax rate of 2,50% or less
  • Gross IP income reduced by expenses incurred for the production of IP Income
  • All intangible assets are eligible under the law.
  • Both internally developed or acquired assets are treated the same
  • There is no limitation of the place of research and development
  • Portfolio of IPs can be registered outside Cyprus

Our Formation Package

  • Registered Address and Agent
  • Company Secretarial Maintenance
  • Government fees
  • Certificate of Incorporation
  • Memorandum & Articles of Association
  • Appointment of First Directors
  • Consent Actions of the Board of Directors
  • Share Certificates
  • Register of Directors and Members
  • Company Seal

We also offer Nominee and Management Services (Substance requirements) along with bank account opening and international tax planning.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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