The Cyprus Royalty Company
Recently (in May 2012 but with effect as from the January 1, 2012) the Cyprus House of Representatives changed the royalty taxation in Cyprus, making it the most profitable jurisdiction for registration and management of the intellectual property.
The effective tax rate applicable on the Cyprus Royalty Company will not be higher than a maximum of 2% on its received royalties or on the transfer of the intellectual property in future.
It is possible reduce even more the 2 % effective rate by the deduction of the above capital allowances.
1. The 2 % resulting rate for licensing intellectual property.
The law changes created special incentives for the Cyprus companies, owning intellectual property – trademarks, patents, copyright, which generates income.
Until now, for these companies the income from intellectual property was taxes with the normal rate of 10% profit tax on the net profits.
The changes introduced and exempt from the property tax, excluding 80 % of the profit resulting from royalties.
On the rest of 20 % of the royalty income, the normal will be applied.
In order to determine the profit acquired through license of intellectual property, the law allows to deduction from the royalty income all expenses incurred for the production, acquisition or development of royalty income, including capital allowances for acquisitions and development of intellectual property.
2. Further incentives, allowing the reduction of the 2 % using new provisions related to capital allowances for acquisition and development of such rights.
In addition to the above-mentioned exemption of 80 % from the profit tax, the Cyprus Royalty company will be able to deduct the expenses made with the registration, transfer of ownership and development of such rights in the first five years of its use.
The company will be able to deduct the 20 % of capital allowances starting from the first year of the intellectual property use, up to the 5th year from its acquisition.
3. The third important incentive is related to the further future transfer of the intellectual property.
Either the intellectual property will be transferred with the same profit tax of 2 % or the company’s shares may be directly transferred, without any involved costs on the intellectual property of the company, irrespective to its value, but only with the very small Registrar of Companies notification costs.
In order to be able to register or transfer the intellectual property to your Cyprus company, you may use providers of such services, such as intellektus.com.
For the setting up and management of the intellectual property on the Cyprus Royalty company, you may use our specialized in intellectual property directors, officially licensed by international authorities as patent attorneys, in order to provide substance to this companies. To acquire these services, write to office@fiduciara.com or find more information on our website.