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Cyprus: An Attractive Intellectual Property Destination With Considerable Tax Incentives
Intellectual property is the area of law that approaches the protection of the rights of creators of original works. It includes everything, ie literature, music, inventions and trademarks. In general, the main purpose of intellectual property jurisdiction is to support the development of new technologies, inventions, arts and to promote economic growth and innovation. That is, individual creators and inventors have stronger incentives to develop their creative projects once they are aware that their work will be protected and may have some financial benefits from doing so.
Cyprus has established an innovative system that deals with the protection of IP rights in detail. Precisely, an advanced system has been established that ensures that the results of innovation and creativity are protected at a national, European and international level. In addition, Cyprus is a signatory to international IP treaties and protocols such as WIPO, European Community Trademarks, Patent Cooperation Treaty, Paris Convention for Industrial Protection, Trademark Law Convention and more.
In Cyprus, the main mechanisms for the protection of intellectual rights are patents, trademarks and copyrights.
Patents protect a work from being created, traded or used by others for a certain period of time. In Cyprus, a national patent certificate is issued by the Department of the Registrar of Companies and the Official Collector. On the other hand, a European patent certificate is granted by the European Patent Office. International patent certificates in accordance with the provisions of the Patent Cooperation Treaty are administered by the World Intellectual Property Organization (WIPO).
Trademarks protect the names and enable identification of brands, products and companies. The logic of trademarks is to help consumers distinguish between different competitors. Trademarks are created when a business starts using a unique mark to identify its company.
Trademark protection is arranged in the following ways:
1. Instructions Cap. 268 of the Cyprus Law offers protection at a national level.
2. Regulation 207/2009 of the European Union and Regulation 6/2002 of the European Union offer through Cyprus uniform protection throughout the territory of the European Union.
3. Given that Cyprus is a signatory to the Paris Convention for the Protection of Industrial Property, as administered by WIPO and a party to the Madrid Protocol, global trademark protection is guaranteed.
Copyright refers to the protection of artistic works. Creators have exclusive rights to reproduce and publicly display their works as they wish. However, it should be clarified that copyright does not consider the protection of ideas but the way in which they are expressed. Copyright allows creators to receive financial benefits from their work. Furthermore, copyright prevents others from enjoying the works of creators without their permission.
The Intellectual Property Protection Law No. 59/79 offers copyright protection at a national level. In addition, Cyprus is a signatory to the Berne Convention for the Protection of Literary and Artistic Works, which includes a wide range of rights, including software copyrights. The latter provides protection to all member states of the Convention without the need for further action.
Cyprus “IP box”:
In Cyprus, the “IP Box” program was introduced on January 1, 2012. Specifically, it is a package of incentives and tax exemptions relating to income derived from IP rights. Among the principle goals are to adopt investments in research and development and innovative inventions that will benefit the general public. The term “IP box” refers to reduced taxation on income or profits derived from the license, disposal or transfer of a patent.
The EU countries that apply similar intellectual property rights taxation schemes are France, Belgium, Hungary, Ireland, Luxembourg, the Netherlands, Spain and the United Kingdom. “IP box” schemes can be divided into two categories. The first category, adopted by France, the Netherlands and the United Kingdom, refers to tax reductions on qualifying income. The second category, adopted by Belgium, Hungary, Luxembourg, Spain and Cyprus, sees an exemption of a certain percentage of income.
Cyprus offers considerable tax incentives such as:
An effective tax rate of 2.5% per year, which are the lowest percentages in the European Union. Cyprus is more competitive than other countries. Exactly, in Luxembourg the effective tax rate is 5.7% and in the Netherlands 5%. As a result, businesses investing in IP assets in Cyprus can take advantage of an effective tax rate of 2.5% on IP exploitation. At the same time, they benefit from the EU and international IP conventions and protocols.
- Competitive amortization provisions for five years. This provision refers to IP rights obtained or developed after 1Street of January 2012.
Cyprus has a wide network of tax doubling art.
80% of the net global royalty income generated from intellectual property owned by companies located in Cyprus is exempt from income tax.
80% of the net profit generated from the realization of intellectual property owned by companies based in Cyprus is exempt from income tax.
The Cyprus International Fund receiving dividends from owners of Cyprus intellectual property will not be subject to any type of taxation in Cyprus. Moreover, the trust may accumulate income that can be converted into capital at the end of the year without tax consequences for the trust or its beneficiaries, provided that none of the beneficiaries is a tax resident of Cyprus.
An IP obtains the benefits mentioned above only if the taxpayer owns the IP, is officially registered in Cyprus or abroad. Moreover, the IP must be applied in the production of income.
Cyprus’ efficient intellectual property tax regime and corporate jurisdiction are two important factors that make Cyprus a highly attractive destination for the acquisition or development of IP assets. As detailed above, the Cyprus IP Box offers attractive incentives for setting up an IP business in Cyprus.
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