The Intellectual Property Tax regime of Cyprus combined with the protection offered by EU Member States and by the signatories of all major Intellectual Property treaties and protocols Cyprus offers an efficient and favourable jurisdiction for registering and managing IPs.

 

Intellectual Properties (IPs) can be the most valuable assets of a Cyprus registered organization.

 

THE CYPRUS INTELLECTUAL PROPERTY TAXATION

 

The Intellectual Property taxation includes a wide range of intangibles:

 

• Copyrights (literary works, dramatic works, musical works, scientific works, artistic works, sound recordings, films, broadcasts, published editions, databases, publications, software programmes)

• Patented inventions

• Trademarks designs and models that are used or applied on products.

 

Intellectual Properties are not necessary to be registered in Cyprus to benefit from Intellectual Property regime of Cyprus.

 

TAX BENEFITS OF INTELLECTUAL PROPERTY OF CYPRUS COMPANIES

 

The tax provisions provide exemptions from tax of income related to Intellectual Property. More specifically:

 

• 80% of worldwide royalty income generated from Intellectual Property owned by Cyprus resident companies (net of any direct expenses*) is exempt from income tax

• 80% of profit generated from the disposal of Intellectual Property owned by Cyprus resident companies (net of any direct expenses*) is exempt from income tax

• Any expenditure of a capital nature for the acquisition or development of Intellectual Property is claimed as a tax deduction in the year in which it was incurred and the immediate four following years on a straight-line

• All the above exemptions are also available for Intellectual Properties acquired or developed before January 2012

 

*Direct expenses include finance costs to acquire/develop Intellectual Property and annual tax amortization.

 

The EU Directives and Regulations relating to Intellectual Property protection apply and have been introduced into Cyprus local legislation. With a single Intellectual Property registration in Cyprus, Intellectual Property rights owned by Cyprus companies may enjoy full protection in all EU Member States.

 

Example:

 

Assume that a Cyprus IP company licenses its IP to its operating foreign companies and in return it receives royalty income of €100,000 per year.

 

The expected annual  tax for the Cyprus IP Company will be as follows:

 

Annual Royalty Income             €100,000

Direct expenses (Say)               -€20,000

Net income                                  €80,000

80% deemed deduction            -€64,000

Taxable income                           €16,000

@10% Income Tax                         €1,600

Effective tax rate                             1.6%

 

Under the majority of double tax Treaties the withholding tax on royalty payments is 0%.