Changes to Cyprus Intellectual Property Regime:The Income Tax Law with respect to the application of the Cypriot intellectual property regime has recently been amended and approved by the Cypriot Parliament.The new provisions of the IP regime are now consistent with the OECD Action Plan recommendations for better tax practices, supporting also transparency.The relevant laws and regulations implementing the new regime will take legal effect once they are published in the Official Gazette of the Republic.

Existing IP regime

As per section 9(1)(e) of the Income Tax Law, under the existing IP regime,  a notional deduction of 80% has applied to net income and gains derived from intellectual property namely, patents, copyrights and trademarks. The amendments provide for a five-year transitional period and the existing IP regime will be maintained for income tax purposes and will expire in 2021, upon certain conditions.

The new IP regime and the nexus approach

The new controls present “nexus approach” prescribed by OECD. This approach limits use of the IP regime if innovative work (research and development) is being outsourced to related third parties.The approach interfaces the advantages of the regime with the research and development costs brought about by tax payers. According to the new IP regime, qualifying tax payers will be qualified to guarantee a tax deduction leveling with 80% of qualifying profits deriving from business utilization of the qualifying resources.  A tax payer may choose not to guarantee the deduction or just claim a piece of it.

It ought to be specified that the arrangements of the new IP regime apply just to licenses and patent reciprocals, copyrighted programming, utility models and other IP resources that are non-self-evident, helpful and novel.This implies any advertising related IP resources, for example, trademarks will not be dealt with as qualifying assets. The controls give that IP resources must be ensured by a pertinent power either in Cyprus or abroad. The controls give that tax payers ought to keep up books and records for money and consumption for every qualifying impalpable resource.


The new enactment is mind boggling and tax payers ought to look at the potential effect of the new expense arrangements on their IP structures and operations. Tax payers ought to likewise comprehend the way toward ascertaining the qualifying profits and guarantee they have the frameworks and procedures set up to isolate out applicable income and assemble data on innovation.








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