Cyprus New IP Regime

Under the new IP regime, 80% of qualifying profits generated from qualifying assets will be deemed to be tax deductible expenses. Qualifying assets are assets which can be acquired, developed or exploited in the course of the business and relates to Intellectual Property (IP).  Any IPs relating to marketing are excluded from the provisions of the law. Such IPs can be trade names, brands, trademarks, image rights etc. Intangible assets which do not fulfil the criteria of the law, will not have the 80% exemption, but can be tax deductible over their useful economic life with a maximum of 20 years. The qualifying profits eligible for the 80% tax exemption will depend on the level of research and development carried out by the company in order to develop the asset.  A specific formula is used to determine the profits which takes in consideration the overall income, the qualifying expenditure, the uplift expenditure and the overall expenditure.  Capital gains arising from the disposal of qualifying assets are not considered as qualifying profits and are fully exempt from income tax. Qualifying expenditure can include salaries, commissions in relation to R&D, general expenses in relation to R&D, direct costs etc.

The taxpayers who are eligible for the IP regime are:

  • Cyprus tax resident companies or persons. For companies to be Cyprus tax residents means that their management and control must be situated in Cyprus. Hence, their directors must reside in Cyprus and all board meetings must be held in Cyprus.
  • Permanent establishments (Branches) in Cyprus of foreign companies