The IP box is an ultra-loose tax regime for IT companies, where the tax rate can be reduced to 2.5%.
Cyprus is known in Europe as a jurisdiction with one of the mildest and most favorable tax climates. The corporate tax rate here is one of the lowest in the EU — only 12,5%. And there are no taxes on inheritance, foreign income, dividends, shares, etc. The country also has an IP box program, under which a company that profits from innovation from qualifying assets can be taxed at a reduced rate.
IP box tax regime: how to register a company
Qualifying assets that fall under the IP box regime are:
- research and development;
- software;
- mobile applications;
- computer programs and games;
- drugs for the treatment of rare diseases;
- patents for inventions;
- innovative objects of intellectual property;
- medicines, etc.
How the IP box rate is calculated:
- 80% of earnings on qualifying assets are not taxed. The remaining 20% is taxed at 12,5%. That is, income tax can be as low as 2,5%.
Who may apply the IP box regime:
- Cyprus tax resident companies;
- Permanent establishments of foreign companies that pay taxes in Cyprus.
It is noteworthy that this program does not apply to the company’s profits as a whole but separately to each piece of intellectual property. This is convenient because the object has no physical attachment to a particular location. Thanks to this system, most IT companies in Cyprus conduct their business abroad. As of today, there are over 2 thousand such companies registered.
Suppose you want to register your company under the IP box program, contact SPM Real Estate. In that case, we will provide detailed advice and help with registration.
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