Changes To The Cyprus ‘‘Intellectual Property Box''

1. Introduction

In October 2016 the Cyprus Parliament passed a law amending the Income Tax Law of 2002 in order to bring its provisions on taxation of income from the use or sale of intangible assets into line with the ''modified nexus'' approach.

This approach, which was agreed by G-20 leaders late in 2014 and subsequently adopted by the OECD and the EU, allows taxpayers to benefit from an intel- lectual property (''IP'') taxation regime, commonly known as an IP box, only to the extent that they can demonstrate material relevant activity, including a clear connection between the rights which create the IP income and the activity which contributes to that income.

Countries whose IP regimes were incompatible with the modified nexus approach were required to take steps to amend them. No new entrants to non- compliant IP regimes were permitted after June 30, 2016. However, ''grandfathering'' arrangements were permitted, allowing taxpayers already in