The Cyprus Intellectual Property Rights 'Box'

Background

In May 2012 Cyprus introduced a package of measures to promote economic growth which included a number of tax incentives aimed at boosting the island's predominantly service-oriented economy. The most notable of these is a series of incentives and exemptions relating to investment in intellectual property rights, commonly known as an intellectual property rights box ("IP box").

The IP box concept dates back to 2001, when France introduced a reduced rate of tax on revenue or gains deriving from the license, sublicense, sale, or transfer of qualifi ed IP. Belgium, Hungary, Ireland, Luxembourg, Netherlands, Spain and the United Kingdom have also introduced similar schemes. The underlying rationale is to stimulate a flow of investments into the research and development sector by providing tax incentives, which can be justified on the grounds that successful innovation creates benefits for the public at large.