Introduction

The Cyprus Parliament approved the amendment to the legislation in respect to the tax incentives relating IP regime, which is in line with the latest international developments on the subject and the recommendations of the Organisation for Economic Co-operation and Development (OECD) taking into account transparency and substance.

Current Legislation

Under the previous regime, 80% of the net profit derived from the exploitation of IP was exempted from taxation. This tax incentive was applicable until 30 June 2016.

Transitional period

A 5 year transitional period is provided by the amended legislation, from 1 July 2016 to 30 June 2021, in which the current IP regime can be applied, subject to certain conditions.

New Legislation

As per the new IP regime, qualifying taxpayers can claim an 80% tax deduction of qualifying profits generated from qualifying assets.

Qualifying profits (QP) shall be calculated with the following formula:

QP = Overall Income × (Qualifying Expenditure + Uplift Expenditure) / Overall Expenditure

Qualifying assets exclude marketing related IP assets such as trademarks, brands and image rights.