IP Advisory
Cyprus IP Box Structuring
Qualification analysis, nexus modelling and the deduction position under BEPS Action 5.
What we do
We establish whether your asset qualifies under the Cyprus intellectual property regime, model the nexus fraction your company can actually reach, and build the expenditure record the deduction is claimed out of. The deduction is 80 percent of qualifying profit, which at the 15 percent corporate rate is an effective 3 percent where the fraction reaches one.
That last clause carries the engagement. The fraction measures development the company itself funded against total expenditure on the asset, so two companies with identical revenue from identical software can pay materially different rates. Knowing which one you are is the first piece of work.
What you get
- Qualification analysis of the asset against the definition of a qualifying intangible
- Ownership review, including the assignment chain from founders, employees and contractors
- Nexus modelling on your actual hiring and contracting plans, not the best case, with the alternatives compared side by side
- An expenditure classification framework separating qualifying, uplift and overall expenditure
- Income attribution isolating the part of the revenue that belongs to the qualifying asset
- Contractor and employment arrangements structured so the spending qualifies where it can
- Transfer pricing documentation for intercompany licensing and development
- Qualifying and overall expenditure tracked per asset as the year runs, and the nexus fraction computed in the tax return
- The 120 percent research deduction weighed against the regime asset by asset, since the two cannot be claimed on the same expenditure
How it works
The regime rewards development the claimant paid for. Payments to the company's own employees and to genuinely unrelated contractors are qualifying expenditure wherever those people sit. Buying an asset in, or paying a related party to build it, is not, and it enters the denominator all the same. An uplift of up to 30 percent of qualifying expenditure softens that, capped at the non-qualifying amount.
The fraction is cumulative across the life of the asset, so the decisions that set it are made before the spending happens and a year of poor records is not recoverable afterwards. That is why the record is part of the service.
There is a second requirement the fraction does nothing for: the claimant has to be Cyprus tax resident on the management and control test, and a structure can pass either test while failing the other. Economic substance carries that side, and we address both together.
Working with us
Four steps, and the first one is a conversation
A call
What the asset is, who built it, and which entity paid the invoices. No charge for it.
A proposal in writing
Fixed fees, not estimates: what the review costs, and what the annual work behind the claim costs.
You accept
Engagement letter signed, then onboarding. Neither takes long.
You see your real number
The fraction modelled on your own expenditure and your own plans, with the options set against each other, before anything is restructured.
Common questions
What rate would we actually pay?
Approximately 3 percent at a nexus fraction of one, which is the best case rather than a starting point. Below full nexus the effective rate rises in proportion, and the honest answer for any particular company comes out of modelling its own expenditure history. That is the first thing we do.
Does software qualify?
Copyrighted software qualifies as a class, and so do patents, utility models and other protected technical rights. Trademarks, brand names, domain value and marketing intangibles do not. What decides the size of the benefit is not whether the asset qualifies but how much of its development the company funded itself.
Our developers are contractors abroad. Does that break it?
Not by itself. What matters is the legal relationship and who bore the cost, not where people sit. Payments to your own employees and to genuinely unrelated contractors count wherever those people are, while development outsourced to a related party dilutes the fraction even when it is performed in Cyprus.
Can we get certainty before committing?
Yes. A ruling application to the Cyprus Tax Department is available, and a priority response is issued within 21 working days. Whether it is worth taking depends on how large the position is and how novel the facts are, and we will tell you which of those applies to you.
Can we claim the 120 percent research deduction as well?
Not on the same asset. Qualifying research expenditure attracts a 120 percent deduction, available to 2030, and it cannot be claimed on expenditure relating to an asset that is claiming the intellectual property regime. They are alternatives rather than additions. Which is worth more turns on where the asset is in its life and how much income it is producing, so we model both before you commit.
What follows
The claim is made in a return and supported by the record behind it, and both run on an annual cycle. Accounting and tax compliance carries the accounts, the audit coordination and the return. The ownership structure is where the fraction is set in the first place, and it is worth settling before the next phase of development is contracted rather than after.
| Deduction | 80 percent of qualifying profit |
|---|---|
| Effective rate at full nexus | 3 percent at full nexus. Best case, most sit higher |
| Framework | OECD modified nexus approach under BEPS Action 5 |
| Qualifying assets | Patents, copyrighted software, utility models and other protected technical rights |
| Excluded | Trademarks, brand names, domain value and marketing intangibles |
| What decides the benefit | Who funded the development, measured cumulatively over the asset's life |
| Research deduction | 120 percent on qualifying R&D to 2030, but not on an asset claiming the IP Box |
Also in IP Advisory
Find out whether Cyprus fits your plans
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.