The Cyprus IP Box Regime allows companies to deduct 80% of qualifying profits derived from the exploitation of qualifying intangible assets when computing taxable income. Qualifying assets include patents, computer software, and other legally protected IP rights developed through qualifying research and development expenditure. With the standard Cyprus corporate income tax rate set at 12.5%, the effective rate on qualifying IP profits is 2.5%, making Cyprus one of the most attractive IP holding jurisdictions in the European Union.
The regime is compliant with the OECD's modified nexus approach, meaning the proportion of profits eligible for the 80% deduction is linked to the proportion of qualifying R&D expenditure incurred directly by the Cyprus entity relative to total acquisition costs. Multinational groups that conduct genuine development activity in Cyprus, or that restructure to centralise IP ownership alongside substantive local functions, can substantially reduce their effective global tax burden.
Both royalty income and capital gains on the disposal of qualifying IP are eligible for the regime. This makes Cyprus a compelling jurisdiction not only for ongoing IP exploitation but also for pre-exit IP holding in advance of a company sale or licensing transaction.