In accordance with the OECD BEPS Action 5, Cyprus has abolished the existing IP box scheme, with effect from 30 June 2016, with transitional rules applying until 30 June 2021 for companies already using the old scheme (applicable with restrictions). The new Cyprus IP box scheme which has been introduced and is effective as from 1 July 2016 provides for a 80% deduction for profits from qualifying IP.

 

Effective tax of 12.5% on 20% of the qualifying profits as a result

 

This results in an effective tax of 12.5% (same as corporate tax rate in Cyprus) on 20% of the qualifying profits.

Qualifying IP types include intellectual property assets developed by a person as a result of research and development activities such as patents and copyrighted software.  Marketing related IP such as trademarks, image rights and brand names do not qualify.

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