IP Box Regime

Tax Advice & Tax Compliance

IP box regime

Why to choose Cyprus?

Cyprus continues to be an attractive location for business investment opportunities as well as tax planning benefits within the framework of the Intellectual Property Law of Cyprus. The Cyprus IP Box regime, introduced in 2012 and then updated in 2016 to comply with the guidelines of the Organization for Economic Co-operation and Development (OECD), distinguishes the country as the ideal destination for international investors to achieve IP protection and beneficial financial incentives.

The main feature of the Cyprus IP Box regime is the 80% deduction of revenue earned from the use of intangible assets. This exemption from profits means that only 20% of IP income is tax at the corporate tax rate of 12.5%. After applying the calculations, Cyprus-resident companies can see an effective tax rate as low as 2.5%.

To access benefits of this regime, companies need to follow a few steps, which include:

  • Set Up a Cyprus Based Company: Companies have to set up base in Cyprus. Registering a company under Cypriot law is easy and faster than in many other EU countries. This can be done remotely, with the help of legal advisor;
  • Transfer of Ownership: The IP ownership has to be transferred to the newly established company;
  • Licensing of Rights: The Cyprus company can license the rights to use the IP to any other company;
  • Patent Box Structure: The company needs to seek legal advice to organise the patent box structure. There will also be a need to prepare legal agreements.

Under the new Intellectual Property Law of Cyprus, qualifying assets include patents, copyrights software programs, and other intangible assets deemed non-obvious, useful and novel. Trademarks and copyrights do not qualify under the Cyprus IP Box regime. However, these may still benefit from other provisions of the Cyprus tax law, such as capital allowances or notional interest deduction, which will help reduce the overall effective tax rate of the company.

For more information and/or advice, feel free to contact us via email at [email protected]

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