Cyprus is the perfect location and for an establishment of Company to hold Intellectual property. Under the Cyprus tax regime, the, company can optimize its tax efficiency and to obtain the legal protection provided by an EU member country.

Under the old IP regime 80% of the profits qualifying for the regime are exempt from tax. With a corporate tax rate of 12.5%, this can result in an effective tax rate of as low as 2.5%. The Old regime is effective up to 30/06/2016. Taxpayers owning IP that were already included in the old Cyprus IP box up to 30/06/2016 continue to apply the old Cyprus IP box provisions for a further five years i.e. until 30 June 2021 for those intangible assets.

From 1 of July 2016 onward the New IP regime was implemented using modified nexus fraction. According to this approach, the level of the qualifying profits is positively correlated to the extent the claimant performs R&D activities to develop the qualifying asset (QA) within the same company. The nexus fraction is therefore used to determine the amount of qualifying profits that will give the relevant deduction to the taxpayer.

Other intangible assets that are used in the business of a taxpayer and do not qualify for the IP regime may still benefit from other provisions of the Cyprus tax law. Capital allowances and/or notional interest deduction (NID) may be available to these assets, which will help reduce the overall effective tax rate of the company. Examples of such assets include trademarks, copyrights and other intellectual property assets.

For IP holding Companies that wish to benefit from the New IP tax regime, depending of the facts and IP income to be earned is advisable that a ruling be obtained from the tax authorities on whether a Company is eligible to use the IP tax regime. This practice will avoid any negative tax assessments in the future once a positive ruling is obtained.

A more detail article with IP calculation example will be published in our website soon. The link will be shared in our social media channels.

For more information on our services visit our website www.auditgency.com or contact us directly through our website or through our social media channels.

For learn more about the old and new IP tax regime contact us at info@auditgency.com.

свернуть