Intellectual property holding solution
Cyprus offers a very useful IP tax regime. The law provides for a certain tax exemption for income derived from intellectual property. More specifically, 80% of the worldwide royalty income generated from IP owned by a Cyprus tax-resident company (net of direct expenses) is exempt from income tax. In addition, 80% of profits generated from the disposal of IP owned by Cyprus-resident companies (net of direct expenses) is also exempt from income tax, and any expenditure of a capital nature for the acquisition or development of IP is tax-deductible in the year in which it was incurred and the four subsequent consecutive years.
Companies registered in Cyprus, if managed and controlled from Cyprus, will receive a tax clearance certificate. In order for the company to maintain its management and control in Cyprus, the majority of the company's board of directors must be Cyprus residents, the company's secretary and registered office must be located in Cyprus, the board of directors must hold its meetings in Cyprus and, if possible, the company's shareholders should hold some of their meetings in Cyprus. The tax authorities have also increased their requirements and are now looking into the issuing of powers of attorney by companies. If a general power of attorney is issued by the company allowing someone who is not resident in Cyprus for tax purposes to act on its behalf, this might render the company non-tax resident.