IP Box explained: the 2.5% effective rate
Cyprus has one of the most attractive IP regimes in the EU. Here is who qualifies and how the 80% exemption is calculated.
The Cyprus IP Box can bring the effective tax rate on qualifying intellectual-property income down to around 2.5%. If you build software or own IP, it is worth understanding.
Who qualifies?
Qualifying assets include patents and copyrighted software developed by the company. Marketing-related IP such as trademarks does not qualify.
How the exemption works
80% of the qualifying profit is exempt from tax. The remaining 20% is taxed at the standard 12.5% corporate rate, giving an effective rate near 2.5%.
The nexus rule
The benefit is proportional to how much of the R&D you did yourself. Outsourcing development to a related party reduces the qualifying fraction.
Not sure if you qualify?
Sumly models your IP Box benefit and keeps an audit-ready trail of qualifying income.
Keeping records
You need to track qualifying income and expenditure per asset. Good bookkeeping from day one makes the claim painless.
About the author
Daniel M.
Founder, Sumly
Former studio owner in Nicosia. Built Sumly after one too many weekends lost to VAT.
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