In our article “A Step by Step guide for forming a Company in Cyprus” published in August 2017 we demonstrated to the reader a detailed approach of the benefits and procedure to be taken in setting up a Company in Cyprus. In continuation to this article we decided to provide a further analysis of the benefits surrounding a Cyprus Holding Company. As a result of questions raised by various prospective clients today we shall tackle the tax regime of a Cyprus Intellectual Property organization.
Under the Cyprus Tax legislation on Royalties effected in 2012 (IP Box Regime) Companies were allowed to have certain tax advantages as long as they were part of the qualified Intellectual Property (IP) rights with the condition that they were acquired/ developed before January 2012. Qualifying IP rights included but were not exhausted to copyrights, registered patents and trademarks, artistic or literal works, software etc. It should be noted that for IP rights registered outside the Republic of Cyprus, a Cyprus Company could still benefit from the IP Box Regime.
The IP Box Regime legislation was applicable to IP Companies until the 30th of June 2016. Between the foresaid period and 30 June 2021 only existing registered IP Box Companies will continue to enjoy the “fruits” and be able to apply the tax regime. The IP Box regime as described above was heavily investigated and finally terminated for both Cyprus and other countries after pressures were exercised from the Organization for Economic Co-operation and Development (OECD) and the Economic and Financial Affairs Council (ECOFIN).
Nevertheless, Cyprus has introduced since 1 July 2016 (for intangible assets owned or developed after 1 July 2016 by the Cyprus Company on its own name in the Republic of Cyprus or abroad) a new IP Box Regime complying with OECD requirements and effectively remaining an ideal location for registering an IP or Research and Development (R&D) Company.
By introducing the revised IP box regime Cyprus has complied with OECD requirements and together with the extensive network of double tax treaties has established itself as an attractive location for registering an IP or Research and Development (R&D) Company in the Republic of Cyprus.
The content of the above article is to provide a general guidance of the new Cyprus IP box. Specialized, tailor made advice should be requested based on each scenario and specific needs accordingly.