Why Choose Cyprus for Your International IT Business
An attractive European country in the Mediterranean, historically Cyprus has been an attractive international business hub. IT Businesses are the future, and Cyprus offers the advantageous combination of modern office facilities with sea views and legal and tax system caringly tailored to welcome IT businesses from all over the world.
Tax Incentives for Cyprus IT Companies
Cyprus offers special tax incentives for IT businesses that develop in Cyprus patentable technologies or copyrighted software. These companies are entitled in Cyprus to the effective corporate tax rate of only 2.5 on the profits related to the royalties derived from the IP and/or copyrighted software developed in Cyprus. This effective tax rate is derived from the tax exemption of 80 per cent of such profits. With the standard Cyprus corporation tax rate of 12.5 per cent this results in the effective corporation tax rate of 2.5 per cent.
The 2.5 per cent effective tax rate applies to royalty income, embedded income, and other qualifying income. The net profit derived from qualifying assets is calculated following the nexus approach fraction, by which the higher the research and development cost incurred directly or indirectly by the company the higher the profit on which the allowance is given. Qualifying assets include but are not limited to patents, copyrighted software, extensions to patents, and other certified by a designated authority. The regime is available to taxpayers with annual revenue from intellectual property developed in Cyprus not exceeding €7.500.000 and group revenue not exceeding €50.000.000 taken on a five-year average.
The special tax incentives for royalties derived from patentable technologies and copyrighted software developed in Cyprus are additional to the generally favourable Cyprus taxation system from which IT companies in Cyprus also benefit:
- A wide network of double tax treaties with favourable rates of withholding taxes on interest and royalties;
- Regardless of double tax treaties, Cyprus has zero tax on dividends received and paid by Cyprus companies owned by foreign owners (subject to certain easy to meet conditions)
Cyprus Welcomes Non-EU IT Specialists
In addition to the tax incentives, most recently the Cyprus Government adopted additional incentives for IT companies permitting them to employ in Cyprus IT specialists in a wide range of categories from non-EU countries.
Advantages for Owners of IT Companies
The incentives offered by Cyprus to IT companies also extend to the company owners.
The owners of IT companies who are nationals of non-EU countries can obtain an “enjoyment of life” permanent residency in Cyprus or a work and residence permit as directors of their companies.
Foreign owners of IT companies relocating to Cyprus can enjoy the special tax advantages offered here to non-domiciled residents: tax free dividend, interest and rental income for the first 17 years of their life in Cyprus.
Conclusion
This article broadly covers the benefits, incentives and advantages for headquartering in Cyprus the businesses developing patentable technologies and copyrighted software, and is intended for general information only. Our tax and legal experts with decades of advisory experience are at your service to consider your specific case.