All posts by Ariadne

IP Box Regime

What is Intellectual Property (IP)?

IP is a category of property that includes intangible creations of human intellect. Such as inventions, innovative algorithms and formulas, software programs, trade-secrets and know-how, manufacturing practices, marketing concepts, artistic works, designs, images, names, and inventions used in commerce.

Why is it beneficial?

IP assets do not have a geographical nexus and can be relocated without significant costs. Multinational companies use this on their benefit to reduce and plan the overall tax burden of the group companies’ resident in countries with advanced IP box regime.

How it is classified?

  • Anything that is considered qualifying intangible asset can be added to the IP complying that is related to the acquisition of IP or to the development of the IP.
  • IP is classified as a non-current asset in the financial statements and it is amortized over the period of years according to the Regime of each country.

IP Box Regime in Cyprus

Under the Principal of the IP BOX Regime in Cyprus the following features apply

  • 80% of the profits qualifying for the regime are exempt from tax, the rest 20% is tax at corporation rate of 12.5% giving an effective tax rate of 2.5%
  • From 5 up to 20 years amortization period
  • 0% tax on gain from disposal of the IP if it is classified as capital nature transactions

Qualifying Assets

Qualifying assets can be developed within the company.

  • Patents
  • Software programs with a copyright
  • Other intangible assets that is not obvious but are useful and novel.
Calculating the IP Box Regime   To calculate the IP Box regime, we need to use the Nexus Fraction which determines the range of qualifying profits relevant to the deductions on the taxpayer.  
Overall income (OI)OI is calculated as the gross income minus direct expenditure. This consists of the capital allowances of the assets, royalties received for the use of non-tangible assets, income from the trade of disposable QA, and embedded income originating from the qualifying asset. It does not include capital gains from QA disposal.
Qualifying Expenditure (QE)QE can be salary/wages, direct costs, general expenditure linked to R & D activities, and R&D expenditure from independent sources. It does not include any expenses of IP acquisition, paid or payable interest, any costs payable to related persons handling R&D, and costs that cannot prove a direct link with specific QA.
Uplift Expenditure (UE)The expenditure is calculated as a less 30% of QE.
Overall ExpenditureAll the expenditure of the company


To put things in perspective, we set out some numerical examples illustrating how, under the new IP regime, one would reach the QP stage on which 80% notional deduction would be applied.

The major factors in the examples are:

  • whether the asset was internally developed or whether it was acquired, and
  • whether R&D costs were outsourced to related parties or to third parties.

The following cases will be examined:

  1. The asset was developed or improved internally, with R&D costs being undertaken by the company itself.
  2. The asset was acquired, with subsequent R&D costs for improvements of the asset being were outsourced to non-related parties.
  3. The asset was acquired, with subsequent R&D costs for improvements being outsourced to related parties.
 Case 1Case 2Case 3
Overall Income (OI) from qualifying IP€1,000,000€1,000,000€1,000,000
  Cost of acquisition of assetN/A€300,000€300,000
  R&D costs, incurred internally€500,000N/AN/A
  R&D costs, outsourced to non-related partiesN/A€200,000N/A
  R&D costs, outsourced to related partiesN/AN/A€200,000
Overall Expenditure (OE)€500,000€500,000€500,000
  R&D costs, incurred internally€500,000N/AN/A
  R&D costs, outsourced to non-related partiesN/A€200,000N/A
Qualifying Expenditure (QE)€500,000€200,000N/A
  30% of the qualifying expenditure€150,000€60,000

  Total cost of acquisition + cost of outsourcing to related parties0€300,000€500,000
Uplift Expenditure (UE)0 €60,000

For the purposes of the examples, the following figures are used :

Applying the above figures to the formula for calculation of the Qualifying Profit (QP) and the tax benefit of up to 80% as a notional deduction, we have:

qualifying profitQualifying Profit (QP)Notional Deduction (80% of QP)

Case 1:€1,000,000 x [(€500,000 + €0) / €500,000]€1,000,000€800,000
Case 2:€1,000,000 x [(€200,000 + €60,000) / €500,000]€520,000€416,000
Case 3:€1,000,000 x [(€0 + €0) / €500,000]€0€0

As a result, the IP tax benefit will be:

Case 1:    Taxable profit will be decreased by €800,000 notional expense – 2.5% effective corporate tax rate 

Case 2:    Taxable profit will be decreased by €416,000 notional expense – 7.3% effective corporate tax rate 

Case 3:    No notional expense applies – 12.5% effective corporate tax rate 

Why Cyprus IP Box?

  • Cyprus applies to a wider range of income compared to other European schemes.
  • Lowest percentage of tax rate on
  • One of the highest percentages of exempt qualifying profits

OSS (One Stop Shop)

The OSS simplifies VAT registration and filing, enabling businesses to account for VAT on sales in multiple EU countries with a single digital VAT return.


Eliminates the need for VAT registration in countries that you sell goods but you do not store goods in

One OSS return that covers all of your EU VAT cross-border obligation for B2C sales

Money due to other EU countries will be sent by the home tax office

For example, companies storing goods in their home country and selling into 5-6 other EU countries without storage there, will now only have to submit one home VAT return and one OSS VAT return per period. A payment for each return will be required. 


Annual sale of goods or digital services higher than €10,000.

 If you sell “low value goods” which cost less than €150 outside the EU then you need to register for IOSS as well.

IOSS (Import One Stop Shop)

IOSS (Import One Stop Shop)

IOSS is for non-EU sellers. It allows sellers from outside the EU to submit all of their sales that do not exceed €150 to EU countries in one monthly tax return to one country in which they are registered in, rather than filing an individual returns to each individual EU country. The EU tax authorities will then distribute the VAT. This is not subject to excise duties (alcohol or tobacco products).

This will make importation of goods from outside the EU much faster since products imported to the EU with a valid IOSS number will pass through customs automatically allowing faster and cheaper deliveries for sellers.


Sellers registered in the IOSS need to apply VAT when selling goods destined for a buyer in an EU Member State. The VAT rate is the one applicable in the EU Member State where the goods are to be delivered. Information on the VAT rates in the EU is available on both the European Commission website.


If businesses are not based in the EU, they will normally need to appoint an EU-established intermediary to fulfil their VAT obligations under IOSS. Consortia can provide this service. To register for IOSS click on the link here.


Provide the information required for customs clearance in the EU, including the IOSS VAT identification number to the person declaring the goods at the EU border.

Show/display the amount of VAT to be paid by the buyer in the EU, at the latest when the ordering process is finalised.

Ensure the collection of VAT from the buyer on the supply of all eligible goods with final destination in an EU Member State.

Make sure that eligible goods are shipped in consignments not exceeding the EUR 150 threshold.

To the extent possible, show on the invoice the price paid by the buyer in EUR.

Submit an electronic monthly VAT return via the IOSS portal of the Member State where you are identified for IOSS.

Make a monthly payment of the VAT declared in the VAT return to the Member State where you are identified for IOSS.

Keep records of all eligible IOSS sales and/or sales facilitated over 10 years.

When making a sale on a marketplace, use the IOSS ID of the marketplace not yours.

HS code needs to be on all shipments.

Non-Domicile Status

Cyprus government introduced the concepts of ‘domicile’ and ‘non-domicile’ (Non-Dom) through an amendment of the Special Contribution for the Defence of the Republic of Cyprus Law of 2002 (SDC Law) in July of 2015. Since then, an individual who is  non-domicile (not born and raised in Cyprus) can enjoy the features of Non-Dom.


An individual who is not a Cyprus resident.

An individual who receives Dividends, Interest or Royalties from abroad.

Entrepreneurs who travel internationally or have businesses abroad


Non-Dom lasts for 17 years

It is reviewed and renewed every 3 years.

All Dividends, Interest or Royalties received will be taxed at 0%.

Needs to pay only 2.65% for General Health insurance on the first €180,000 received which sums up to €4,770.


Tax Identification Code (TIC)

Tax Residency in Cyprus

Birth Certificate as a proof that the individual was born in another country.

Individual needs to follow the 60 days rule.


Filling and submitting a form. The original Non-Dom certificate takes up to 3 to 4 months to be issued. However, the individual can start claiming Dividends, Interest, Royalties from the day of submission.

Setting up a Cyprus company


Enjoy the international image of having a EU company.

Optimize and plan your structures with the lowest tax rates in the EU.

Access and provision of world class financial services.


  1. Reserve a trading name for the company (takes up to 5 working days but we have already approved company names).
  2. Approint the company’s officers- Director, Shareholder, Secretary and Registered Office.
  3. Prepare, sign and submit the Memorandum and Articles of Association of the company. (takes 10-15 days for the company to register).
  4. Open a corporate bank account with a local bank or online bank in which the share capital will be deposited.
  5.  Register and obtain a VAT number for the company and Tax Identification Code (TIC) for the company and the individual.
  6. Obtain the necessary business licenses which will allow the commencement of the economic activities, such as EORI number (needed for companies trading goods in Europe over £600 ) or LEI number (Legal Entity Identifier).
  7. If the individual is not a Cyprus resident, then the individual can apply for a Non-Domicile status.


Once the above steps are completed the business will obtain the following certificates.

Certificate of Directors & Secretary

Certificate of Shareholders

Certificate of Registration

Certificate of Registered Office

Certificate of Good Standing

Memorandum & Articles of Association

Tax Residency in Cyprus

As of 2017, an individual is a tax resident of Cyprus if one satisfies either the ‘183 day rule’ or the ’60 day rule’ for the tax year. For earlier tax years only, the ‘183 day rule’ is relevant for determining Cyprus tax residency.


The ‘183 day rule’ for Cyprus tax residency is satisfied for individuals who spend more than 183 days in any one calendar year in Cyprus, without any further additional conditions/criteria being relevant.


The ’60 day rule’ for Cyprus tax residency is satisfied for individuals who, cumulatively, in the relevant tax year:

  1. Do not reside in any other single state for a period exceeding 183 days in aggregate.
  2. Are not considered tax resident by any other state.
  3. Reside in Cyprus for at least 60 days.
  4. Have other defined Cyprus ties.


The day of departure from Cyprus counts as a day of residence outside Cyprus.

The day of arrival in Cyprus counts as a day of residence in Cyprus.

Arrival and departure from Cyprus in the same day counts as one day of residence in Cyprus

Departure and arrival in Cyprus in the same day counts as one day of residence outside Cyprus.

Opening a bank account in Cyprus

The process for opening a personal bank account in Cyprus has changed over the last years. The recent amendment to money laundering laws and regulations, and the directions of the Central Bank of Cyprus have made the process more demanding, however, anybody having the necessary documents and guidance will not have any issues.


Anyone who is over 18 years old. Acting as a signatory of the bank account in Cyprus or can appoint someone to manage it, by using a power of attorney.

A private company whether it is a Cyprus company, or that of any other jurisdiction.

It is possible to open a Cyprus bank account both for residents or non-residents and for local or foreign companies.


E-banking application: having full control of your account from anywhere in the world through your phone or laptop.

Digipass / Token: small device that uses a One Time Password (OTP) to verify the authenticity of transactions made through the account.

Credit / Debit card: for daily use of operational and personal expenses.

Multi-Currency Bank Accounts.

No minimum deposits.

DOCUMENTS REQUIRED (It takes approximately 3 working days for the bank account to be open.):


  • Passport Copy.
  • Recent utility bill as proof of address not older than 3 months.
  • Bank/Financial institution reference letter not older than 3 months.
  • Detailed CV.
  • Information & documents concerning annual income (tax declaration if applicable, company documents, income/payslips, profits/dividends, etc).
  • Information & documents concerning source/value of wealth and relevant supporting documents (bank statement, title deeds etc.).


  • Recent Certificate of Incumbency and Letter of Good Standing from its official registrar.
  • The full address of the company/principal trading address and description of activities(website).
  • Certificate of Registration.
  • Certificate of Directors and Secretary.
  • Memorandum and Articles of Association.
  • The documents showing the corporate structure of the legal entity leading up to the UBO should be provided and clearly presented in case of complex structures.
  • Recent Annual Audited Financial Statements &/or Management Accounts.
  • Information & other documents regarding the source of funds.
  • Good Standing Letter, Bank reference letter not older than 3 months.
  • All the above documents required for personal bank account for the owners of the company.
  • All documents must be in English or if in another language to be officially translated.

Alien Registration Certificate (Yellow Slip)

The Registration certificate, commonly known as ‘Cyprus Yellow Slip’, as it is printed on yellow paper, is available to European (EU and EEA) citizens who wish to stay and work or remain as visitors in the Republic of Cyprus.

The application for the issue of the certificate is submitted within four months from the date of entry into the Republic.

Citizens of the European Union and their family members who are also сitizens of the European Union apply with the MEU1 form.

Family members who are not European Union citizens apply with the MEU2 form.


The yellow slip is issued by the Civil Registry and migration department at Nicosia and is mailed to the applicant’s address. This procedure takes about 3-5 months.

Cyprus yellow slip


The Registration certificate for European Union citizens does not expire.

The certificate for non-EU family members has a validity of 5 years, on expiry the applicant can apply for renewal.

Renewal of the yellow slip for non-EU family members, you need to provide all the documents and certificates as provided for the first registration.

No need to renew a yellow slip for EU citizens, as it does not expire.


  1. Application forms MEU1 & MEU2 duly completed.
  2. Copy of valid passport.
  3. Marriage Certificate duly certified and translated *(If applicable).
  4. Children Birth Certificates duly certified and translated *(If applicable).
  5. Rental agreement or sale agreement of a house/apartment.
  6. Bank statements of a bank account in Cyprus or bank statements from abroad.
  7. If working abroad to bring a confirmation letter from the employer and payslip.
  8. If working in Cyprus – Confirmation Letter from employer.
  9. Health Insurance.
  10. Two small passport photos.

Temporary Residency (Non-Europeans)

Cyprus temporary residence permit, the so-called Pink Slip, allows Non-European Union passport holders to extend their stay in Cyprus for more than 3 months (90 days). It will also enable tourists and visitors to extend their stay no matter what the duration of their initial visa was. They should apply before their current visa expires.


Can extend the stay in Cyprus for Non-Europeans up to one year without the need of a visa.

It can be renewed.

Families can apply at the same time; each family member files a separate application form and gets a temporary residence.


Renting a house or apartment in Cyprus.

Need to show adequate amount of more than €5,000 for an individual or more than €15,000 for a family.

For a family needs to prove that parents are married.


Cannot stay out of Cyprus for more than three months continuously as the permit would be cancelled automatically.

No right to work in Cyprus.

Is granted only to non-EU Nationals who wish to extend their stay in Cyprus.

Valid for one year, can be renewed annually.


Application form for a temporary residence permit in Cyprus.

Rental agreement or sale agreement of a house or apartment.

Bank statement of a bank account abroad showing adequate amount of funds.

Open a bank account in Cyprus.

Get a bank guarantee. (Processing time for the bank to issue the bank guarantees is 1-2 days).

            → Eastern Europe countries, Russians = €550

            Middle East countries = €350

            Asian / American countries = €850

Health Insurance (Private Health Insurance costs €200)

Documents to prove income coming from abroad.

Passport Copy

Marriage Certificate duly certified and translated.

Children Birth Certificates duly certified and translated.

Procedure takes usually 10 working days to get all the documents and apply. Then the individual or the family will book an appointment for the immigration to go and get biometrics.

Tax Incentives



Corporation tax on net profit is 12,5%.

Dividend income is wholly exempt from income tax, but see paragraph 16 below.

Any gains realised on disposal of securities / shares in subsidiaries are not subject to taxation in Cyprus. This applies to all gains including capital gains and gains from trading in securities, but see “Capital Gains” at 15.

A notional interest deduction (NID) is allowed on paid, newly introduced capital.

There is no holding period requirement for dividends or capital gains exemptions.

Cyprus is a member of European Union (EU). As a result, Cyprus holding companies can receive tax-free dividends from their EU subsidiaries in cases where the Parent – Subsidiary Directive applies, subject to any anti-avoidance provisions in the jurisdiction of the paying company. Interest and Royalties can also be free of withholding taxes through the application of the Interest and Royalties Directive.

Cyprus has a wide network of double tax treaties providing zero or low withholding tax rates on interest, dividends and royalties.

There is no withholding tax on dividend, interest and royalties paid to non- resident individuals, and corporations.

There is no general Controlled Foreign Corporation (CFC) legislation.

Interest paid to non-resident group companies is tax deductible.

There are no thin capitalisation rules.

There are no general transfer pricing rules but transactions between related parties should be at “arm’s length”.

Taxes withheld abroad can be credited against corresponding Cyprus tax even in cases where there is no double tax treaty between Cyprus and the other country. Also, where tax was withheld on dividends by an EU country the tax credit includes the share of tax paid on the gains of the company paying the dividend and the gains of its subsidiaries.


        → Can be offset against other sources of income.

        → Can be carried forward for five years.

        → Losses of a company can be set off against profits of another company of the same Group (Group of Cyprus tax-resident companies).

        → World-wide losses can be set off against taxable income of the same year or carried forward.

Reorganisations, Mergers, Acquisitions, Amalgamations:

        → The Law adopted the Merger Directive of the European Union, but took into account emerging EU policies. The Law covers domestic and foreign reorganisations, and reorganisations abroad that have effect in Cyprus; these are exempted from all taxes including Capital Gains Tax, VAT, Stamp Duties, and Land Transfer Fees.

Capital Gains:

        → Capital gains are not taxable in Cyprus except for the 20 % tax on gains on immoveable property that is located in Cyprus, and on any gain from the sale of shares in companies that own, directly or indirectly, immoveable property in Cyprus. All other gains of a capital nature are not taxable.

Dividends Received by a Company:

        a. Participation Exemption:

            → Defense contribution, another form of taxation, is imposed as follows: 17% on dividends received. Nil if received from a non-resident company. The exemption will not apply if the paying company derives more than 50% of its income from investments, and foreign tax on its income is substantially lower than the tax that is payable in Cyprus on the dividends received.

        b. Dividends from foreign companies:

            → Such dividends will not be exempt from income tax if the dividends were allowed as a tax deduction in the country of residence of the paying company, in which case, then (a.) above will not apply.