Cyprus IP Box Regime: Qualifying Assets and Claiming the Benefit
How qualifying profits from intellectual property can receive a reduced effective tax rate, and what documentation the nexus approach requires.
Check that the asset qualifies
Qualifying assets typically include patents, computer software and certain other IP resulting from qualifying research and development. Marketing intangibles such as trademarks do not qualify.
Apply the nexus calculation
The benefit is proportionate to the share of R&D expenditure incurred by the company itself, relative to total expenditure. Track expenditure per asset from the start so that the ratio can be proven.
Claim in the corporate tax return
Present the calculation with the corporate tax return and keep a file explaining the IP, its development and income streams. Auditors from the Tax Department may ask to see this documentation.
FAQ
Does IP Box apply to income from outsourced development?
Outsourcing to unrelated parties can count toward the qualifying expenditure, whereas payments to related parties and acquisition costs reduce the benefit fraction. Plan the development structure with an adviser.