TBA & Associates

Cyprus Intellectual Property (IP)
Tax Planning

Governments worldwide are continually exploring new tax measures related to Intellectual Property (IP) taxation. As a result, companies are increasingly considering IP tax planning, including the relocation of IP assets from one tax jurisdiction to another with more favorable tax rates.

We offer guidance on evaluating the diverse IP tax regimes in various jurisdictions, each with varying financial implications for your overall tax obligations.

Selecting the Optimal IP Location

Intellectual Property (IP) is a valuable asset for any organization. The strategic decision of where to centralize and manage IP is crucial. The ideal location for establishing an IP structure should align with the organization’s business model, safeguard and protect its IP, and contribute to tax optimization.

Patented Inventions

IP encompasses a broad range of intangibles, including copyrights, covering literary works, music, artistic works, and more, as well as patented inventions, trademarks, designs, and models.

Cyprus’s “IP Box”
Tax Regime Advantages

In May 2012, the Cyprus government introduced growth measures, including incentives and tax exemptions related to income from intellectual property rights, designed to encourage investment in research and development. Consequently, Cyprus now offers an efficient IP tax regime with the protection afforded by EU Member States and major IP treaties.

IP projects lend themselves to cross-border planning due to the mobility of intellectual property rights, which can be readily migrated between different jurisdictions and tax systems based on evolving circumstances.

Cyprus offers one of the lowest tax rates on IP rights in Europe. 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%. You don’t need to have your IP registered in Cyprus to benefit from the favorable tax regime. Your IP can be registered anywhere globally, with a Cyprus company serving as the registered holder of the IP.

Cyprus’s IP tax incentives encompass various intangibles:

  • Copyrights (e.g., films, music, software)
  • Trademarks and designs
  • Patents

Double Tax Treaties

Cyprus has almost 70 double tax treaties in effect, offering reduced or zero withholding tax rates for royalties from these jurisdictions.

The EU Directives and Regulations concerning IP protection are fully integrated into Cyprus national legislation. This allows IP rights owned by Cypriot resident companies to enjoy complete protection across EU Member States and major IP treaties and protocols.

Cyprus IP location – Tax benefits

The new provisions provide exemptions from tax for IP-related income:

  • 80% of worldwide royalty income from IP owned by Cypriot resident companies (net of direct expenses) is tax-exempt.
  • 80% of profits generated from IP disposal by Cypriot resident companies (net of direct expenses) are tax-exempt.

Any capital expenditure related to the acquisition or development of IP can be claimed as a tax deduction in the year it’s incurred and the subsequent four years, using a straight-line method.

Overall, this results in an effective tax rate of 12.5%, one of the lowest in the EU. The amount subject to tax under the new rules is calculated by deducting the writing down allowance, financing costs, and other direct expenses from the revenue earned and dividing the resultant amount by five. This results in an effective tax rate of 2.5% of the net income.

In comparison to other jurisdictions, Cyprus provides a highly favorable tax rate for IP income.

Exploiting IP through Cyprus

After implementing the IP box regime, significant savings can be achieved by locating the IP owner in Cyprus and directly licensing rights to end-users. This strategy eliminates or reduces foreign withholding taxes through double tax agreements or the EU Interest and Royalties directive, resulting in both tax and administrative cost savings.

The new rules enhance legal and jurisdictional protection, with IP structures governed by Cypriot laws, increasing legal certainty, asset protection, and predictability.

Cyprus’s extensive double tax treaty network and access to the EU Interest and Royalty Directive offer additional opportunities for tax optimization when exploiting IP assets through Cyprus.


Assuming a Cyprus IP company licenses its IP to foreign operating companies and receives an annual royalty income of €20,000:

  • Annual royalty income: €100,000
  • Direct expenses: (€20,000)
  • Net income: €80,000
  • 80% deemed deduction: (€64,000)
  • Taxable income: €16,000
  • Income tax at 12.5%: €2,000
  • Effective tax rate: 2.5%

VAT Considerations

The acquisition of intellectual property rights by a Cyprus company from anywhere in the world is treated as a service, leading to VAT registration obligations. Charging royalty fees to EU taxable entities also requires VAT registration for the VIES (VAT Information Exchange System).

In Conclusion

The revised system offers highly appealing prospects for structuring the utilization of IP assets via Cyprus, particularly by employing Cyprus-based IP owners. This is especially significant within the context of Cyprus’s extensive network of double tax treaties, where foreign withholding taxes on royalty income are either entirely eliminated or significantly reduced.

In most scenarios, businesses can promptly achieve economic and tax benefits by transferring intellectual property rights from entities situated in low or tax-free jurisdictions to companies resident in Cyprus, capitalizing on the newly introduced exemptions. Importantly, the transfer of IP rights into a Cyprus company doesn’t trigger any form of taxation within Cyprus. The newly introduced benefits and substantial exemptions become accessible as soon as the assets are transferred.

The European Union (EU) Directives and Regulations pertaining to IP protection have been fully integrated into Cyprus’s domestic legislation. As a result, a single IP registration process within Cyprus provides comprehensive protection for IP rights owned by Cyprus-based companies across all EU Member States.

How TBA Can Assist You

  • Establishing a Cyprus IP Holding Structure
  • Providing Guidance on Corporate Statutory Compliance Matters
  • Advising on the Transfer of Existing IP Assets to Cyprus
  • Offering Ongoing Support Beyond the Initial Setup
  • Cyprus is a signatory to several international conventions that are pertinent to Intellectual Property (IP)
  • EC Regulation on the Community Trademark (CTMR)
  • Convention Establishing the World Intellectual Property Organization (WIPO)
  • The Madrid Agreement Concerning the International Registration of Marks (Madrid Agreement, MMA) and Protocol to the Madrid Agreement
  • The Patent Cooperation Treaty (PCT)
  • Berne Convention for the Protection of Literary and Artistic Works
  • Paris Convention for the Protection of Industrial Property
  • Geneva Convention for the Protection of Producers of Phonograms Against Unauthorized Duplication of their Phonograms
  • WIPO Performance and Phonograms Treaty (WPPT)
  • Rome Convention for the Protection of Performers, Producers of Phonograms, and Broadcasting Organizations
  • Trademark Law Treaty
  • WIPO Beijing Treaty on Audio-visual Performances

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Disclaimer: While TBA & Associates strives to make the information on this website as timely and accurate as possible, the information itself is for reference purposes only. You should not substitute the information provided in this article for competent legal advice. Feel free to contact TBA Customer Services for advice on your specific cases.

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