For many years now Cyprus is attracting various Intellectual Property Rights companies for all over the world due to the security provided in addition to the important tax exemptions on income tax arising from the use of IP rights.
Cyprus as an EU state member provides protection of such companies having signed the International Regime of IP protection but also a number of other important European and International agreements with organizations and communities.
Intellectual Property Rights holding Companies.
The intellectual property (IP) and copyrights are some of the most significant assets of a corporation. The choice of the jurisdiction in where the management will operate is a strategically important decision to be made. The ideal jurisdiction for the formation and protection of the Intellectual Property can bring lot of value into a corporation, but mainly will contribute to a proper tax planning. In addition it can enhance the competitiveness of the company, add value and contribute to the reduction of costs.
For the above reasons, the choice of the jurisdiction where the company will hold and manage the rights of IP is a crucial decision. The chosen jurisdiction has to combine a wide network of double tax avoidance and an attractive tax regime. In addition low or zero dividend withholding should be available.
The protection of Intellectual Property copyrights is essential as it provides the owners a vast amount of advantages. Protecting IP, intangible assets of the company can turn into financially valuable capitals, while the acknowledgment and development of these strength points can position the establishment in a competitive level with many advantages.
Intellectual Property rights in Cyprus.
Cyprus combines protection provided by EU and the International Regime of IP protection, after the agreements signed by the Republic of Cyprus. At the same time the tax regime of Cyprus provides important exemptions from the income tax arising from the use of Intellectual Property rights, something that is hard to find in other jurisdictions.
The extensive network of Double tax avoidance agreement, combined with the EU community directive, offer an attractive taxation scheme on the exploitation of Intellectual Property rights through Cyprus. Cyprus has signed multiple European and International agreements, and is a member of many organizations and communities for the development and the protection of IP rights. Some of them are: World Intellectual Property Organization, the agreement and protocol of Madrid for the international registration of trademarks, Paris convention for the protection of IP, the Patent Cooperation Treaty, the Bern convention on the protection of literature and artworks.
Intellectual Property rights in Cyprus works automatically and no registration is needed. The Intellectual Property Law (59/1976) protects Cyprus citizens for their work issued anywhere in the world and the foreigners for their work issued in Cyprus. Intellectual Property copyrights are protected for:
- Scientific work
- Literature work, including computer programs and applications
- Music works
- Art works, including photography
- TV / Radio shows
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.