Background Cyprus IP regime is fully compliant with international developments in the tax treatment of IP income and
OECD’s guidance. The IP regime has been reviewed by the EU Code of Conduct and has been assessed as fully compatible with EU standards. Benefits of the Cyprus IP regime 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%. Relevant details of the regime Under the Cyprus IP regime, 80% of the qualifying profits generated from the qualifying assets is deemed to be a tax deductible expense for qualifying taxpayers. In calculating the qualifying profits, the new regime adopts the ‘
Nexus’ approach. According to this approach, the level of the qualifying profits is positively correlated to the extent the claimant performs R&D activities to develop the qualifying asset (QA) within the same company. Qualifying assets Qualifying assets under the new regime include: • patents, • copyrighted software programs, and • other
intangible assets that are non-obvious, useful and novel. Qualifying assets do not include trademarks and copyrights.