NEWS Fiscal & legal

How to take advantage from Intellectual Property

Cyprus offers an efficient IP tax regime coupled with the protection afforded by EU Member States and by the signatories of all major IP treaties and protocols

IP rich organizations can achieve in Cyprus an effective tax rate of lower than 2% from their IP exploitation and at the same time enjoy the protection afforded by the EU and all major international IP treaties and protocols.
Royalties are the payments of licence fees or commissions by one individual or entity to another for the use of Intellectual Property (IP). IP can take several forms:
  • copyrights which can include literary works, dramatic works, musical works, scientific works, artistic works, sound recordings, films etc
  • patented inventions
  • trademarks, designs and models that are used or applied on products
Registrable IPs need not be registered in Cyprus to benefit from IP regime.
The aim is to generate the income arising from these rights in the most tax efficient manner possible.

Ideal IP location

IP can be one of the most valuable assets of an organization. Choosing the right location for the centralization and management of IP is a very important strategic business decision. The ideal location to establish an IP structure is one that one can serve the organization’s business strategies/model, safeguard and protect its IP and contribute to its tax optimization.
Cyprus offers an efficient IP tax regime coupled with the protection afforded by EU Member States and by the signatories of all major IP treaties and protocols.

Benefits of Cyprus IP

Recent provisions provide exemptions from tax of income related to IP. More specifically:
  • 80% of worldwide royalty income generated from IP owned by Cypriot resident companies (net of any direct expenses*) is exempt from income tax
  • 80% of profit generated from the disposal of IP owned by Cypriot resident companies (net of any direct expenses) is exempt from income tax
  • effective tax rate of 2% or less
  • any expenditure of a capital nature for the acquisition or development of IP is claimed as a tax deduction in the year in which it was incurred and the next four years on a straight-line basis
In addition:
  • no withholding taxes on payment of royalties when distributed out of Cyprus
  • tax is only paid on the licence fee retained by the Cyprus company
  • Cyprus has an extensive worldwide network of double tax treaties
  • the EU Directive on Interest and Royalties providing for nil withholding taxes between EU countries which is applicable
  • Cyprus corporate tax rate is at 12.5 percent amongst the lowest within the EU
  • the licence fee retained by the onshore intermediary company will typically be 5 percent
Other advantages of Cyprus include:
  • competitive fees
  • fast incorporation
  • low capital requirements
A Final note
The EU directives and regulations relating to IP protection apply and have been introduced into Cyprus domestic legislation. With a single IP registration process in Cyprus, IP rights owned by Cyprus companies may enjoy full protection in all EU member states.
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