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Intellectual Property - Efficient IP Regime
Soteris Pittas & Co LLC has observed an increase in the amounts of the IP asset registrations that are taking place. One may wonder why clients tend to choose Cyprus as an EU Intellectual Property destination?
We shall try to examine below, in short, the reasons why Cyprus can be regarded as a tax efficient EU intellectual Property location not forgetting, whilst considering so, the background of a generally accepted fact, that Cyprus has an efficient and reliant Cyprus tax regime overall, which serves as a pillar for the centralization and management of the IP structure.
Cyprus offers an efficient IP tax regime tied up with the protection afforded by EU Membership and by being a signatory of all major IP treaties and protocols.
The provisions of the current law provide exemptions from tax of income related to IP and more effectively it provides for an exemption of 80% of the gross income (less the direct cost for generating such an income) from the use of the qualifying intangible assets. Hence, 80% of the overall profit derived from the qualified intangible asset is treated as deductible expense.
Qualifying intangible asset means an asset which was acquired, developed or exploited by a person in furtherance of his business and which is the result of the research and development activities and includes intangible assets for which only economic ownership exists and there assets are (i) patents, as defined in the Patents Law () (ii) computer software (iii) other IP assets like (a) utility models, intellectual property assets which provide protection to plants and genetic material, orphan drug designations and extensions of protections of patents (b) non-obvious, useful and novel, where the person which utilizes them in furtherance of a business does not generate annual gross revenues exceeding EURO 7.5 ml (in case with group companies not exceeding EURO 50 ml) which are certified as such by an appropriate authority in Cyprus and abroad (c) business names, trademarks, image rights used to market products and services are not considered as qualifying asset.
Qualifying expenditure for the qualifying intangible asset is the sum of total research and development costs incurred in any tax year, wholly and exclusively for the development, improvement or creation of qualifying intangible asset.
Qualifying tax payer that are eligible for the IP regime include residents for the purposes of Cyprus taxation, permanent establishment (PEs) of non-resident persons and foreign PEs that are subject to tax in Cyprus. Qualifying tax payer is required to keep a track of the relevant income and expenditure to be able to accurately calculate the so called “nexus fraction”.
Provided overall financial situation remains the same and banking sector is not undermined by certain processes, we expect the number of the IP registrations to increase in the coming years.
The above decision reconfirms the pro-arbitration bias of the Cypriot Courts.
For further information on this topic please contact:
Mrs. Liza Bokova (firstname.lastname@example.org) at SOTERIS PITTAS & CO LLC, by telephone (+357 25 028460) or by fax (+357 25 028461)