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Cyprus More Attractive for IP Holding Rights Companies
The House of Representatives of the Republic of Cyprus has voted for new amendments in May 2012. These new amendments intend to establish Cyprus as a beneficial intellectual property holding structure by creating an appealing tax regime for Intellectual Property (IP) Rights Holding Companies. Taxand Cyprus explore these amendments and their impact on the taxation of IP.
Currently, a Cyprus Company is taxed with the usual corporate tax (CIT) of 10% on the net profits from any income generated from intellectual property rights.
The amendments to the law provide that 80% of any income generated from IP rights will be exempt from CIT; therefore only 20% of the profits generated from IP rights will be subject to CIT at the rate of 10%.
The tax treatment also covers any profit from the future sale of the IP rights.
Furthermore, the law permits the deduction of all expenses that result out of the production of the royalty income. Therefore, the amount to be paid may be reduced even further.
The amendment of this legislation (Income Tax Law 118(I)/2002), means that a Cyprus IP Company will effectively be liable to a maximum tax of 2%, as it is only taxed on 20% of its profits in case of royalty income. The amendments to thia law came into force on 6 July 2012 and have a retroactive effect as of 1 January 2012.