Cyprus is a destination for many international organizations holding Intellectual Property rights. The reason is the established IP Box and the Tax incentives given for this companies.
What are Intellectual Property rights?
Intellectual property rights (IP rights) are the copyrights of intangible assets such as new invention, innovation, trademark, logo, software, music and generally artistic work, that are by a person or a company. Intellectual property rights are protected by treaties or conventions on local or international level. The protection of the IP rights for a person or a company are of a great importance since it provides the holder, the absolute right of use and exploitation of the property and of course legal protection in the case of copy or use without consent from a third party. In addition, the protection of IP property is a financial asset for any organization. Intellectual property is an important asset for companies because of the exploitation from sales, rentals or other fees but is also a reason to attract investors.
Types of Intellectual Property rights.
IP rights vary depending on the type, the use and the purpose of the work. The main types of Intellectual Property rights are the below.
Diploma of Patent.
The Diploma of Patent protects new inventions relevant to innovation, procedures, or updates on how a product or a method function. The diploma is granted when the invention is new ready and can be applied in the industry. Owning a Diploma of Patent you have the absolute rights of your invention for 20 to 25 years depending on the industry. The rights cover the construction, the sale, import and export of the patent and more. The power of the Diploma of Patent is valid geographically on the area that is registered. For example, a Cyprus Diploma of Patent protects the owner only in the Cyprus Republic. For worldwide protection a patent needs to be submitted on international level.
Trademarks such as logos aim to distinguish the product or the service of a company from other relevant products or services. The trademark can be a word, a shape or a combination, an image, a sound or even a colour. A trademark can also be a combination of trademarks and logos. A trademark for many international organisations is a huge asset.
Industrial design or sketch protects the appearance of a product. The industrial design consists of the outline, the shape, the color, the texture, the materials used and even the decoration. The industrial design rights do not protect the way a product operates. The operation procedure has to be protected with another type of Intellectual Property rights such as the Diploma of Patent.
When submitting an industrial design is important to advice the Locarno international system of classification for industrial design which is under the umbrella of WIPO (World Intellectual Property Organization). The Locarno Classification, established by the Locarno Agreement (1968), is an international classification used for the purposes of the registration of industrial designs. The twelfth edition of the Classification entered into force on January 1, 2019. Find out more about the Locarno Classification here.
Copyrights are the intellectual property rights that protect works such as literature, vision and sound, musical works, theatrical, movies, databases, recordings, shows, computer software and other similar work. Copyright is granted ex officio without the need of submission of the work or any application and the right of use is valid right ahead.
The conditions to protect such a work in Cyprus republic are:
- It’s a prototype work.
- The work was first published in the republic of Cyprus, or setup in the ground of the republic or was installed on a property in the ground of the republic.
- The copyright owner(s) is an individual citizen of the European Union or a legal entity incorporated in the EU.
Choose the proper IP right for your intangible asset.
Cyprus company owner of IP rights.
A company formed in Cyprus can own the Intellectual Property Copyrights sharing the rights to other establishments located in Cyprus or abroad. The registration of the IP copyrights from a tax resident company has as a result the protection in all EU state members, as well as protection arising by all the agreements signed in international conventions from the republic of Cyprus.
Taking advantage of the double tax treaty agreement and the Community directive on interest taxation and copyrights (2003/49/EK), the Cyprus company will be subject to a competitive tax regime, which covers a wide range of intangible assets.
Special Tax Regime.
The income a Cyprus company acquires by the exploitation of the intellectual property rights is subject to the following tax scheme:
Every capital expenditure of a company concerning the development of intangible assets (trade -marks, patents, intellectual property rights) is equally allocated in a 5 years period.80% of the profit arising from the use of intangible assets (including compensations for the unlawful use of these assets) as well as profit from selling them, is considered as expense for determining the taxable income and is exempted from the corporate tax.
The deduction of 80% will be also applied on the profit arising after all the expenses removal, like capital allowances, interest on the fund for the purchase or development of the asset, as well as other direct costs.
For the above reasons, the formation of a company holding Intellectual Property rights or a Patent in Cyprus is considered the best solution. The owners of these companies can use Cyprus as a base for their operations and take advantage the tax deductions and exemptions provided, adding value and competitive advantage to their businesses.