The Clock Is Ticking For The "Old" Cyprus IP Box Regime

The provisions of the new IP Box regime, under some conditions, allow the companies that were benefiting from the old regime to continue to benefit until the end of June 2021.

Cyprus entities will need to assess whether they are eligible to benefit from the new IP Box regime to ensure a smooth transition from the old one. As a general note, Cyprus currently applies the “modified nexus” approach in line with Action 5 of BEPS Action Plan. Such a regime is subject to stricter substance requirements notably proof of hiring employees and conducting R&D in Cyprus.

In particular under the new regime, which applies on qualifying assets developed after 1 July 2016, qualifying profits and qualifying expenditure are taken into account in arriving at the effective tax rate for IP Box profits subject to taxation in Cyprus. This applies mainly in relation to software and patents.