Intellectual Property (IP) regime in Cyprus

Intellectual Property (IP) can be one of the most valuable assets of an organization. Therefore, choosing the appropriate regime/location for structuring the exploitation of IP assets is vital for an organization in order to achieve efficient business development, effective IP protection and maximization of tax saving 

On 14 October 2016, The House of Representatives approved amendments to the Income Tax Law which results the Cypriot legislation on the taxation of the income from the exploitation or sale of intangible assets (IP), be in line with the recommendations of the Organization for Economic Co-operation and Development (OECD) Action 5 of the Base Erosion and Profit Shifting (BEPS). This is based on a “modified nexus approach”. A taxpayer can benefit from the provisions of a particular IP tax regime if IP income is generated through incurred Research and Development (R&D) expenditures. The Cypriot IP regime could be called as the most beneficial IP regime in Europe. 

The Nexus approach links the benefits of the regime with the R&D expenses incurred by the taxpayer. Particularly, the taxpayers will be eligible to claim a tax deduction equaling to 80% of qualifying profits resulting from the exploitation of the qualifying IP assets. In the case of a resulting loss, only 20% of the loss can be surrendered to other group companies or be carried forward to subsequent years. A company which is eligible for the IP regime, it could achieve an effective tax rate up to 2,5%.