Intellectual Property is any form of original creation that can be bought or sold – from computer software to a film, it may be a brand or logo, a scientific discovery or literary and/or artistic work, like photography.
The Cyprus legal system has been developed to ardently safeguard IP rights. 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.
The IP tax regime covers a wide range of intangibles including:
• Copyrights, which may take any of the following forms: literary works, dramatic works, musical works, scientific works, artistic works, sound recordings, films, broadcasts, published editions, databases, publications, software programmes
• Patented inventions
• Trademarks (and service marks), designs and models that are used or applied on products
The above is a non-exhaustive list. Registrable IPs need not be registered in Cyprus to benefit from IP regime.
In May 2012 Cyprus introduced a package of measures to promote economic growth. The most notable of these is a series of incentives and exemptions relating to investment in intellectual property rights, commonly known as an intellectual property rights box (“IP box”).
The IP Box provides attractive opportunities for structuring the exploitation of your IP assets and has given Cyprus's IP box regime provides a maximum tax rate of 2.5 percent on income earned from IP assets. The comparable rate in its nearest competitor, the Netherlands, is twice that amount, at 5 percent. Luxembourg (5.76 percent) and Belgium (6.8 percent) are close behind the Netherlands but far behind Cyprus. Furthermore, full exemption can be relatively easily obtained in Cyprus by holding the IP assets in a separate company and disposing of the shares in the company rather than the IP itself, taking advantage of Cyprus's extensive capital gains tax exemptions.
The corporation tax rate applicable in Cyprus is 15%; one of the lowest in EU. Thus, when applying the corporate income tax rate of 12,5% on the 20% of the profits earned from the use of IP rights (as 80% is deductable) you are finally left with an effective tax rate of 2.5%. It’s worth noting that the amount subject to tax under the above provisions is calculated by deducting the writing down allowance, the costs (including interest) of financing the acquisition or development of the assets and any other direct expenses from the revenue earned.
The principal features of the Cyprus IP Box are the following:
• The cost of acquisition or development of an IP right may be capitalized and amortised on a straight line basis over five years, giving an annual writing down allowance of 20%;
• 80% of the profit earned from the exploitation/use of the IP rights (including any compensation for improper use) is exempt from income tax;
• 80% of profit generated from the disposal of IP owned by Cypriot resident companies is exempt from income tax;
• Any dividend income generated out of royalty income earned by a Cyprus company and paid to its non-resident shareholders is fully exempt from Cyprus tax of any description.
• Disposition of the shares of the Company owning and/or exploiting the IP rights is exempt from all forms of taxation in Cyprus.
We can assist and advise you in all aspects of Intellectual Property, including registration of trademark, patents, designs and copyrights; assist you in tax related issues; provide for the incorporation of a Cyprus Company and for the management and administration of such a company.
Also our team of litigators can represent you before the European Union Intellectual Property Office, the Cyprus Company Registrar, the Administrative Court and the Supreme Court of Justice in Cyprus, in case you wish to protect your IP rights and/or to object.