Cyprus! an attractive destination to establish your Intellectual Property (IP) and to enjoy the efficient corporate tax rate of up to 80% on qualifying IP profit by way of notional expense deduction. Companies having registered an IP offered a legal protection, afforded to all EU member states, as well as signatories of major IP treaties and protocols.
Qualifying Assets can be:
- Patents,
- Copyright for computer software
- other intangible assets that are non-obvious, useful and novel.
Qualifying assets do not include trademarks and copyrights.
Qualifying persons includes:
- Cyprus tax residence persons
- Permanent Establishment (PE) of Cyprus tax residence
- Permanent Establishment (PE) in Cyprus of Non-Cyprus tax residence.
Qualifying Profits:
Is calculated using the nexus approach formula:
| Qualifying Profits (QP) = | ((Qualified Expenditure (QE) + Uplift Expenditure (UE)) x Overall income (OI)) / Overall Expenditure (OE) |
| Qualified Expenditure (QE) | The qualifying expenditure includes salaries and wages, direct costs, general expenses for R&D activities and R&D expenditure outsourced to unrelated parties. The QE does not include any acquisition costs of the IP, any interest paid or payable, any amounts payable to related persons carrying out R&D and costs which cannot be proved to be directly associated with a specific QA. |
| Uplift Expenditure (UE) | The up-lift expenditure (UE) is the lower of: 30% of the QE and The total acquisition cost of the Qualifying Asset and any R&D costs outsourced to related parties. |
| Overall income (OI) | The overall income (OI) is the gross income less any direct expenditure (including the capital allowances) of this asset. Overall income includes, but is not limited to, royalties and license income from the use of the intangible asset, income received from the disposal of qualifying asset and embedded income earned from the qualifying asset. Capital gains arising from the disposal of such assets are not part of the overall income and are fully exempt from tax. |
| Overall Expenditure (OE) | Overall expenditure of Qualifying Asset is defined as the sum of the qualifying expenditure; and the total cost of acquisition of the qualifying assets, plus the cost of outsourcing to related parties of any R&D activities in relation to these assets, incurred during any tax year. |
The effective tax rate should be reduced by Capital Allowances spread for 20 years and Notional Interest Deduction if available.
