The Cyprus Ministry of Finance has recently announced a number of amendments to the island’s Intellectual Property (IP) tax regime. In accordance to the amendments, the following changes will occur:
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The amendment will include OECD’s recommendations
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Action 5 of the preferential IP tax regime requires the existence of material activity which includes the clear interconnection between the rights which create the income and the activity which contributes to that income.
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According to another parameter of Action 5, there should be no new entrants to the existing IP tax regime after the date that a new regime with the modified nexus comes into effect and no later than 30 June 2016. New entrants include both new taxpayers and new IP assets owned by taxpayers already benefiting from the IP tax regime
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New entrants are expected to fully meet all substantive requirements of the regime and have been officially approved
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The only IP assets that could qualify (under the new modifications) for benefits under an IP regime are patents and functionally equivalent IP assets that are legally protected and subject to approval and registration processes, where such processes are applicable. This excludes marketing-related IP assets such as trademarks, from receiving tax benefits.
The amendments to the IP Tax Regime are expected to enter into force by mid-2016 the latest.
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