Cyprus beneficial tax regarding intellectual property

Cyprus beneficial tax regarding intellectual property

Cyprus provides a significant tax advantage with regards to Intellectual Property (“IP”) making Cyprus an attractive jurisdiction for companies owning IP rights.

Definition of Intellectual Property (IP)

The definition of IP includes all intangible assets, including patents, royalties and trademarks.

Amortization of capital expenditure

Any capital expenditure incurred on acquiring or developing of the IP can be amortized over a period of five years starting from the first year the expenditure was incurred. Thus the capital expenditure is amortized at 20% per annum for five years.

Profit earned from commercial exploitation of IP is 80% exempt

Any revenue arising from the exploitation of the intellectual property rights will be 80% exempt from Cyprus tax. This also includes compensation for infringement and improper use as well as any rights arising from sale. This means that only 20% of the gains will be subject to tax therefore the effective tax rate of the use of the IP will not exceed 2.5% of the income generated taking into account the tax rate of 12.5% in Cyprus.

Profit realized from the sale of IP is 80% exempt from Cyprus tax

A Cyprus tax resident company will be allowed an 80% exemption on the profit which is realized from the disposal of the IP. Profit is considered the sale proceeds less the direct expenses relating to the IP. The effective tax rate will not exceed 2.5% of the profit realized on sale.

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