Cyprus: The amended Cyprus IP box regime

International Tax Review is part of Legal Benchmarking Limited, 4 Bouverie Street, London, EC4Y 8AX

Copyright © Legal Benchmarking Limited and its affiliated companies 2025

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Cyprus: The amended Cyprus IP box regime

kokoni.jpg

Zoe Kokoni

The Cyprus House of Representatives approve legislative proposals for a revised intellectual property (IP) box regime on October 14 2016.

The changes are significant and will have a direct impact on existing or planned structures.

The relevant amendments intend to harmonise the domestic legislation with recommendations under Action 5 of the OECD's BEPS Project and the conclusions adopted by the ECOFIN Council on December 8 2015.

The revised legislation has retroactive effect from July 1 2016. The specific provisions comprising the new IP box regime in Cyprus are summarised below.

Qualifying intangible assets

Qualifying intangible assets refer to assets that were acquired, developed or exploited by a person in the course of his business (excluding IP associated with marketing) and which pertains to research and development activities for which economic ownership exists. Specifically, these assets are:

  • Patents as defined in the Patents Law;

  • Computer software;

  • Other IP assets that are non-obvious, novel and useful, where the person which utilises them in the further development of a business does not generate annual gross revenues exceeding €7.5 million ($8 million) (or €50 million for a group of companies) and which should be certified by an appropriate authority either in Cyprus or abroad; and

  • Utility models, IP assets that provide protection to plants and generic material, orphan drug designations and extensions of protections of patents, all of which should be legally protected.

It should be noted that rights used for the marketing of products and services such as business names, brands, trademarks, image rights, etc. are not considered as qualifying intangible assets.

Qualifying profits

Qualifying profits (income) relates to the proportion of the total income that relates to the fraction of the qualifying expenditure, as well as the uplift expenditure that was incurred for the qualifying intangible asset. Such income, for example, consists of royalties in connection with the use of the qualifying intangible asset and capital gains arising on the disposal of a qualifying intangible asset, among others.

Overall income

The overall income refers to the total income arising on the qualifying intangible asset within a specific tax year reduced by the direct costs for generating this income.

As with the previous IP box regime, 80% of the overall income as defined above is treated as a deductible expense, and in the same manner as losses only 20% of the loss can be carried forward or be surrendered for the purpose of group loss relief.

Qualifying expenditure

Qualifying expenditure for a qualifying intangible asset relates to the total R&D costs incurred in any tax year wholly and exclusively for the development, improvement, or creation of qualifying intangible assets and where costs are directly related to the qualifying intangible assets.

Examples of such qualifying expenditure includes wages and salaries, direct costs relating to the R&D, including costs that have been outsourced, supplies related to R&D, installations used for R&D, among others.

An uplift expenditure is added to the above mentioned qualifying expenditure which is the lower of:

  • 30% of the eligible costs; or

  • The total amount of the cost of acquisition and outsourcing to related parties aimed at R&D in connection to the eligible intangible asset.

Accounting records

Proper books of accounting and records of income and expenses must be kept for each intangible asset by any person who wishes to claim the above described benefit.

Zoe Kokoni (zoe.kokoni@eurofast.eu)

Eurofast Taxand Cyprus

Tel: +357 22699222

Website: www.eurofast.eu

more across site & shared bottom lb ros

More from across our site

Levine, who served under the Joe Biden administration, led the US’s negotiations on the OECD’s two-pillar solution
The deal to acquire ITR's parent company is expected to complete by the end of May 2025
JBS, the biggest meat company in the world, allegedly used Luxembourgian ‘mailbox companies’ to avoid taxes between 2019 and 2022
Despite the conviction of Jessa Dabalos, the Tax Practitioners’ Board’s investigative work continues with five outstanding PwC scandal probes
Heads of tax need to push their teams forward as strategic business advisers to add value across their organisations, says Sandy Markwick
Scott Bessent reportedly felt undermined by Musk naming Gary Shapley as acting IRS commissioner; in other news, Baker Tilly will combine with a top 15 US firm
The promise of nine years’ tax certainty and a ‘rational and pragmatic’ government process makes APAs a no-brainer, Indian tax advisers tell ITR
Despite garnering significant revenues from multinationals, Italy’s digital services tax presents pressing double taxation issues, say Stefano Simontacchi and Francesco Saverio Scandone of BonelliErede
ITR’s research shows that in-house tax counsel in Asia also feel underserved by their advisers’ international networks
World Tax global head of research Jon Moore tells ITR how his team spots standout submissions, and gives early statistical insights into this year’s entries
Gift this article