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Amendments to the IP Regime in Cyprus

The Cyprus Ministry of Finance Cypriot Ministry of Finance has announced in late December 2015 that it will promote amendments to the current Cyprus Intellectual Property (IP) tax regime in order to introduce a new IP tax regime as from 1 July 2016.

The Ministry’s press release states that the prospective amendments will correspond to the recommendations of the final report of the Organisation for Economic Co-operation and Development (OECD), on Action 5 Countering Harmful Tax Practices More Effectively, Taking into Account Transparency and Substance under its Action Plan against Base Erosion and Profit Shifting (BEPS).

The prospective amendments are expected to adopt the so-called ‘’modified nexus approach’’ requiring the existence of material activity including a clear interconnection between the rights which create the income and the activity which contributes to that income.

The amendments are likely to include transitional arrangements, such as grandfathering provisions for existing IP, as these are provided in Action 5 Countering Harmful Tax Practices More Effectively, Taking into Account Transparency and Substance and the applicable European Union (EU) framework.

Clients are advised to reconsider their existing structures to assess the impact of prospective changes as well as take action in order to ensure that they will be able to benefit from the grandfathering provisions.

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