How Cyprus Got Here

Section 2 showed the scale of Cyprus's gaming market. Section 3 showed the diversity of the studios that make it up. Section 4 showed the capital that flows through them. This section looks at what made all of it possible in the first place.

The growth of Cyprus’ gaming sector can be traced back to a specific policy moment in the early 2010s. Before 2012, Cyprus was known abroad for three things: shipping, financial services, and tourism. There was a developing tech sector, but gaming had not yet emerged as a visible industry. That changed when Cyprus introduced its IP Box regime in 2012.

The principle behind the IP Box was straightforward. Companies could benefit from an 80% deduction on qualifying profits from eligible intellectual property, including game engines, source code and in-game IP, subject to the relevant conditions. At the previous 12.5% corporate tax rate, this could result in an effective tax rate as low as 2.5% on qualifying IP income. That made the regime highly competitive by European standards.

The timing mattered. The regime arrived just as the global mobile gaming boom was taking off. Mobile distribution was expanding rapidly, and free-to-play models were changing the economics of the industry. International studios — many from Central and Eastern Europe — were looking for jurisdictions that combined tax efficiency with a credible operating base. Cyprus was well placed to offer that combination.

In 2016, the regime was amended to align with OECD/BEPS standards and the modified nexus approach. The key change was substance: to benefit, a company had to carry out genuine development activity connected to the IP, rather than merely holding rights on paper. Studios whose IP already qualified were given a five-year transition period to allow time for adjustment. The update tightened the rules, but it also made the regime more durable. In practice, the 2016 change strengthened Cyprus’ position as a jurisdiction for real development activity, not passive IP holding. Following the increase of the corporate tax rate to 15% from 1 January 2026, the effective rate under the IP Box is approximately 3% where the relevant conditions are met.

Today, Cyprus is increasingly recognised as a base for international games companies and development activity. That did not happen by accident. As the following pages explain, it reflects a combination of policy, timing and substance — the factors that made this growth possible and continue to support Cyprus’ competitiveness as other countries in the region develop their own offering. What the following pages cover is broader than the IP Box alone — a parallel set of personal-tax provisions forms the other half of Cyprus's framework.

Originally published by C Business Advisors

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