34 pages
The judgement calls founders actually face, with the conditions that push the answer one way or the other.
The structure is usually straightforward. What decides the outcome is order. A Cyprus International Trust requires a settlor who was not Cyprus tax resident in the calendar year before the trust's creation, so a relocating settlor is working against a closing window, and custody, key control and the movement of the assets each carry their own sequencing question.
For a Cyprus company, foreign dividends are exempt in most cases under the participation exemption, and are charged only where the payer is predominantly passive and taxed below 7.5 percent. For an individual, the answer turns on domicile rather than on the source of the dividend.
There is no single answer, because the deciding variable is where the engineering is funded rather than which rate is lowest. Cyprus, Ireland, Estonia and the Netherlands each win under different conditions, and the choice should follow the team and the customers.
Not directly. The deduction is available to a company that is tax resident in Cyprus, which turns on management and control rather than on incorporation. Reaching it means bringing the company to Cyprus by redomiciliation, or bringing the asset to a Cyprus company.
There is no legal requirement for a Cyprus company's directors to be resident in Cyprus. But corporate tax residency follows incorporation in Cyprus or management and control exercised in Cyprus, and where another country also claims the company it is management and control that decides. A board that meets and decides abroad is the clearest way to fail that test.
Not on the same asset. Cyprus grants an additional 20 percent deduction on development spending for the years 2025 to 2030, giving 120 percent. It is not available for expenditure on a qualifying intangible asset where the IP Box has been applied in any year, including the current one.
Only on their own facts. Domicile is personal and is not shared between spouses, so each individual is assessed separately on their domicile of origin and their own residence history. One spouse can be non-domiciled while the other is deemed domiciled.
A model can qualify where it rests on a legally protected asset, most often copyright in the training and inference code, and where the company funded the development. Trained weights alone sit on weaker ground than the code that produces them, so the claim is usually built around the system rather than the model file.
No. Nothing in Cyprus law requires an advance tax ruling before claiming the IP Box. A ruling is worth its fee where a large valuation or a contested characterisation would otherwise sit unresolved inside the structure, and it binds only the Tax Department, on the facts presented, for the taxpayer named in it.
We treat a founder's salary as a related party cost and outside qualifying expenditure. The Regulations admit wages and salaries but exclude amounts paid to a connected person for carrying out research and development, and a founder who owns the company and writes the code is both.
Yes. Copyrighted software is a qualifying intangible asset, so a Cyprus company licensing or embedding its own software can claim the 80 percent deduction. Whether meaningful benefit follows depends on the nexus fraction, which measures how much of the development the company funded itself rather than acquiring from a related party.
Possibly, and the trigger is narrower than founders expect. Malta classes cloud, managed IT, due diligence, identity verification, fraud management and content or odds as material gaming supplies. Sweden, Denmark, Romania and Ontario license business to business supply directly and each draws the line differently, so the answer follows where the players sit.
Yes, and in two separate ways. The company must be Cyprus tax resident on the management and control test, and the nexus fraction independently requires that the company funded the development itself. Satisfying one does not satisfy the other.
Most Cyprus companies need no licence. The question turns on what the company does and for whom. Investment services to clients, crypto asset services to others, accepting bets and issuing or handling electronic money each sit under a licensing regime. Selling your own software, services or goods is not by itself a licensable activity.
Until you have been Cyprus tax resident for 17 of the previous 20 tax years, at which point you are deemed Cyprus domiciled and Special Defence Contribution begins to apply. From 1 January 2026 a person with a foreign domicile of origin may extend the status by up to two further five-year periods for a lump sum.
There is no statutory number. Cyprus applies a management and control test rather than a headcount test, so what is required scales with the activity, the value carried and the relief being claimed. A passive holding company and an operating software business are not asked for the same thing.
Start by confirming the licence, because providing company administration and directorships in Cyprus is a regulated activity. After that the questions that separate providers are who signs, what happens when they disagree with you, and what the fee actually includes.
In Cyprus it turns on whether players pay. Gambling is defined as any game of chance, or of mixed chance and skill, played for money or money's worth, so a genuinely free entry draw sits outside it and a paid one does not. Cyprus publishes no monetary thresholds. Malta does.
On dividends alone it breaks even at one million euro a year. The election costs 250,000 for five years, or 50,000 a year, and what it buys is exemption from Special Defence Contribution at 5 percent on dividends and 17 percent on interest. Below that level the charge is cheaper than the election.
A residence and work route for founders from outside the EU and EEA who establish an innovative startup in Cyprus. The current scheme runs to December 2026, is capped at 150 visas, and grants three years with the possibility of renewal. Approval turns on a scored business plan or on audited revenue and research spending.
A nominee director sits on the board and owes duties to the company. A power of attorney authorises someone to act on your behalf and creates no board seat. They solve different problems, and using a power of attorney to run a company from abroad undermines the management and control position.
The company and the people move on different clocks and in a definite order. The company can be formed and administered without anyone relocating. Employing third country staff runs through the Business Support Centre with a salary threshold for highly skilled roles, and the personal tax position turns on residence and non-domiciled status, not on the incorporation date.
Dividends cost less, at every income level we have modelled, with or without a relocation exemption. For a non-domiciled founder the gap is wide. There are still reasons to pay yourself a salary, and none of them are tax reasons: a residence permit may require one, dividends need distributable profits, and contributions buy social insurance entitlement.
Timing decides the outcome. Cyprus exempts gains on the disposal of securities and charges no Special Defence Contribution on dividends for a non-domiciled resident. Both depend on residency being established before the disposal, and on the departure jurisdiction not retaining a claim.
Yes, and for most software groups it is the preferred structure. A Cyprus IP holding company owns the code and licenses it to an operating company for a royalty. The nexus fraction is maintained by having the IP company itself fund the development, through its own staff or unrelated contractors.
The costs are real: an annual assurance engagement, a bank relationship measured in weeks, and substance that has to be genuine. They are comfortably outweighed where a business moves something real, and wasted where it moves only a registration. Deciding which one you are is the whole exercise.
A Cyprus company pays 15 percent. A founder who relocates and is not domiciled in Cyprus pays no Special Defence Contribution on dividends, and GESY at 2.65 percent capped at 4,770 euro a year. Salary is taxed on bands running nil to 22,000 euro, then 20, 25, 30 and 35 percent.
Four costs, and three of them are decided before the transfer happens. The assignment is a supply of services rather than goods. The price enters overall expenditure and only reaches the numerator through a capped uplift. Goodwill is written off nowhere. And the valuation has to be allocated across components rather than stated as one figure.
Regulation 5 of K.D.P. 336/2016 obliges a person claiming the deduction to keep accounting books and records of income and expenditure per intangible asset. Regulation 4 then excludes from qualifying expenditure any cost that cannot be shown to be directly connected to a specific qualifying asset, so the evidence is part of the definition rather than support for it.
A director provided by a licensed firm holds office with the full duties of any Cyprus director. Expect papers before meetings, questions before signatures, minutes that record reasons, and a refusal where the law requires one. A provider promising signature on demand is describing something the appointment cannot lawfully deliver.
The company that funds the development should own the code. Ownership split from funding produces a weak nexus fraction, a transfer pricing problem and an assignment gap at diligence. Deciding this before the spending starts is worth more than any restructuring afterwards.
A Cyprus holding company receives most foreign dividends free of Cyprus tax under the participation exemption, pays no withholding tax on dividends out to non-residents, and is exempt on gains from disposing of shares. The combination makes it efficient at holding subsidiaries and at receiving a sale price.
Incorporation is the cheapest part of a Cyprus structure and the least consequential. A licensed provider supplies the registered office, resident directors, statutory records and filings that the residency position depends on, and several of those services may only be provided under a licence.
It depends on who funded the development and whether they are connected to the company, not on where they sat. Unconnected employees and arm's length contractors count in full, anywhere. Acquisition cost, connected party development and, on our reading, a founder's own salary do not. Five companies with the same spend pay between 3 and 12.4 percent.
It starts with three questions: where your revenue comes from, what you own, and where you are tax resident. From there, the conversation is about what you are building and where you want to take it. After the call, you receive a written proposal covering the recommended structure, the implementation roadmap, and a fixed fee quote.
