# Cyprus IP Tax 2026: how intellectual property is taxed in Cyprus

> How Cyprus taxes intellectual property in 2026: the IP box and nexus fraction, amortisation of acquired IP, withholding tax on royalties, selling IP, the 120% R&D deduction and substance. Three free calculators, reviewed by Bariono Wealth Advisors, Nicosia.

Publisher: Bariono Wealth Advisors Ltd, Nicosia, CY. Members of ICPAC, ACCA and ICAEW.
Last reviewed: 2026-10-22. Figures marked "Confirm" await adviser sign-off.
Canonical URL: https://cyprusiptax.com/

## Short answer

Cyprus taxes company profits at 15% from 2026. Profit from qualifying IP, such as patents and copyrighted software, can claim an 80% notional deduction under the IP box, an effective rate of about 3%, but only in proportion to the R&D the Cyprus company does itself. Bought-in IP is amortised over its useful life, capped at 20 years. Royalties paid abroad bear 10% withholding tax only where the right is used in Cyprus, 5% for films, and 10% to associated companies in EU-listed jurisdictions. Gains on selling IP are largely outside tax, and R&D spending earns a 120% deduction until 2030.

## Cyprus IP tax rules, 2026

- **Corporation tax rate**: 15% on taxable profit from 1 January 2026, up from 12.5%. Royalty income is taxed at this rate after allowable expenses (In law)
- **IP box deduction**: A notional deduction of 80% of qualifying profit from a qualifying asset, which leaves an effective rate of about 3% (In law)
- **Assets that qualify**: Patents, copyrighted software, utility models, plant variety and genetic material protection, orphan drug designations and patent extensions. Certified non-obvious, useful and novel IP also qualifies for smaller taxpayers with IP revenue up to €7.5 million and group revenue up to €50 million, on five-year averages (In law)
- **Assets that never qualify**: Trademarks, brand names and other marketing-related IP (In law)
- **Nexus fraction**: Qualifying profit is overall profit multiplied by qualifying expenditure plus uplift, divided by overall expenditure. Uplift is the lower of 30% of qualifying expenditure and the cost of acquisitions plus R&D outsourced to related parties (In law)
- **Losses on a box asset**: Where a qualifying asset makes a loss, only 20% of it can be carried forward or surrendered to group companies (Confirm)
- **Amortisation of bought-in IP**: Capital cost of an intangible is deducted over its useful life under accounting principles, up to 20 years. An intangible with an indefinite life is spread over 20 years. The claim is elective each year and unused amounts roll forward (In law)
- **Disposal of bought-in IP**: No balancing statement since 1 January 2020. Amortisation already claimed is not clawed back on sale (In law)
- **Gain on selling IP**: A capital gain is outside Cyprus tax. A trading gain on a qualifying asset is part of box income, so 80% of the qualifying share is deducted (Confirm)
- **R&D super-deduction**: An extra 20% deduction, 120% in total, on qualifying R&D expenditure incurred from 2022 to 2030. It cannot be combined with the IP box deduction (In law)
- **Withholding on royalties paid abroad**: 10% where the right is used in Cyprus, 5% for cinematograph films. Nil where the right is used outside Cyprus (In law)
- **Royalties to EU-listed jurisdictions**: 10% withholding on royalties paid to an associated company, over 50% linked, resident in a jurisdiction on the EU list of non-cooperative jurisdictions. In force since 16 April 2025, and applied whether or not the right is used in Cyprus (Confirm)
- **Royalties to low-tax jurisdictions**: From 1 January 2026 royalties paid to an associated company in a jurisdiction taxing companies below 7.5% are not deductible. The 2026 list names 11 jurisdictions, including the British Virgin Islands, Cayman Islands, Jersey and Guernsey (In law)
- **Treaty and directive relief**: Nil withholding between associated EU companies under the Interest and Royalties Directive. Most Cyprus treaties set 0% on royalties, a few allow up to 10% (Confirm)
- **Transfer pricing Local File**: Required where controlled transactions in a category pass €2.5 million a year, or €10 million for financing and €5 million for goods, from 2026. Below that, a summary table and minimum documentation (In law)
- **VAT on cross-border royalties**: Business-to-business licences are taxed where the customer is. A Cyprus company paying a foreign licensor self-accounts for 19% under the reverse charge (In law)

## How to move intellectual property into a Cyprus company

1. **Map the asset.** List each patent, copyright, software module and trademark, who owns it today, where it was developed and what income it earns. Decide which pieces could qualify for the box.
2. **Value and price it.** Obtain an independent valuation and a transfer pricing analysis of the sale price and any licence, based on who performs the development, management and protection functions.
3. **Transfer and register.** Sign the assignment, record the new owner with each patent and trademark office, and put the licences in the Cyprus company’s name with royalty terms that match the analysis.
4. **Track and file.** Keep track-and-trace records of qualifying and overall spend per asset, prepare the transfer pricing file, declare withholding on outgoing royalties and claim amortisation and the box in the tax return.

## Free tools on this page

- **Cyprus IP route tax comparison**: For one annual IP income stream, compares Cyprus corporation tax and the effective rate when the IP is self-developed in Cyprus with a user-set nexus fraction, acquired from a third party and amortised, acquired from a related party, or held with no IP regime, with an itemised breakdown and a verdict.
- **Cyprus royalty withholding tax checker**: Works out the Cyprus withholding tax on a royalty paid by a Cyprus company to a non-resident, from where the right is used, the recipient's residence and status and the type of right, and returns the rate, the amount, the relief route, the paperwork, the deductibility of the payment and the VAT position.
- **Cyprus acquired IP amortisation schedule**: Builds a year-by-year Cyprus tax amortisation schedule for purchased IP from the price, useful life capped at 20 years and start year, showing each year's deduction, its tax value at 15% and the tax written-down value, and on an optional sale works out the gain and the balancing adjustment under current law and under the pre-2020 rules.

## Questions and answers

### What is the corporation tax rate on IP income in Cyprus in 2026?

15%, up from 12.5% before 1 January 2026. Royalties and other IP income are taxed at that rate after deducting the costs of earning them. Qualifying profit in the IP box gets an 80% deduction first, which brings the effective rate on that profit to about 3%.

### How does the Cyprus IP box work?

The company works out its profit from a qualifying asset, multiplies it by the nexus fraction, and deducts 80% of the result as a notional expense. The fraction compares the R&D the company did itself, or paid unrelated parties to do, with everything spent on the asset including its purchase price and work by group companies.

### Do trademarks qualify for the Cyprus IP box?

No. Trademarks, brand names and other marketing-related IP are excluded. Patents, copyrighted software, utility models and a few other technical assets qualify. A bought trademark can still be amortised over its useful life, up to 20 years, which reduces tax at the full 15% rate.

### Can I use the Cyprus IP box for IP I bought?

Yes, if the asset is a qualifying type, but the purchase price counts against the nexus fraction. If the company does no development of its own after buying, the fraction is close to nil and the box gives almost nothing. The amortisation of the price is then the main relief.

### How long do I amortise acquired IP in Cyprus?

Over its useful life under accounting principles, with a maximum of 20 years. An asset with an indefinite life is spread over 20 years. The claim is optional each year, and anything not claimed is spread over the remaining life rather than lost.

### Is there withholding tax on royalties paid from Cyprus?

Only where the licensed right is used in Cyprus. The rate is 10%, or 5% for cinematograph films, and treaties or the EU Interest and Royalties Directive usually reduce it to nil. Royalties for rights used abroad carry no Cyprus withholding, unless the recipient is an associated company in an EU-listed non-cooperative jurisdiction, which suffers 10%.

### Do royalties paid to a BVI or Cayman company still get a tax deduction in Cyprus?

Not if the recipient is an associated company. From 1 January 2026, royalties paid to a group company in a jurisdiction taxing companies below 7.5% are not deductible. The 2026 list includes the British Virgin Islands, Cayman Islands, Bermuda, Bahamas, Jersey, Guernsey and the Isle of Man. A substance-based exception exists but is narrow.

### What happens to tax if my Cyprus company sells its IP?

For a bought-in intangible there has been no balancing charge since 2020, so amortisation already claimed is kept. A gain that is capital in nature falls outside Cyprus tax. Where the company trades in IP, or the asset is in the box, the gain is income, and 80% of the qualifying share is deducted.

### Can I claim the 120% R&D deduction and the IP box together?

No. The extra 20% on qualifying R&D spending, available until the end of 2030, cannot be combined with the box deduction on the same IP. A common pattern is to take the 120% while an asset is being developed and earns nothing, and move to the box once it produces income.

### Is VAT charged on royalties in Cyprus?

A licence to a business is taxed where the customer is established. A Cyprus licensor charging an EU business charges no Cyprus VAT and reports the sale on its EU sales statement. A Cyprus company paying a foreign licensor accounts for 19% itself under the reverse charge and recovers it if its own supplies are taxable.

### Does a Cyprus IP company need staff and an office?

In practice, yes. The box only rewards R&D the company carries out or manages, and transfer pricing gives the IP return to whoever controls development, maintenance, protection and exploitation. A company with legal title and a nominee board will struggle to defend more than a modest return.

### What transfer pricing documents does a Cyprus IP licence need?

From 2026, a full Cyprus Local File is needed where controlled transactions in a category pass €2.5 million a year, with higher limits of €10 million for financing and €5 million for goods. Below those limits the company still files a summary information table and keeps minimum documentation showing the royalty is at arm’s length.

### Does the Cyprus IP box still help groups caught by the 15% global minimum tax?

Much less. Cyprus collects a domestic top-up tax from groups with consolidated revenue of €750 million or more, so profit taxed at about 3% in the box is largely topped up towards 15%. For those groups the case for Cyprus rests on treaties, people and cost, not the box rate.

### Can a founder move personally owned IP into a Cyprus company?

Yes, by sale or in exchange for shares. Where IP is contributed for shares, the value used for amortisation cannot exceed market value and the Tax Commissioner must be satisfied with it, so an independent valuation is essential. The founder’s own country may tax the transfer, and that is worth checking first.

## Contact

Bariono Wealth Advisors Ltd, https://www.bariono.com