- Cyprus Royalty Company Tax Structure -

Licensing of intellectual property (software, patents, know-how,  films, etc) is a very important activity for international entrepreneurs and entities. In this case a Cyprus Royalty company can play an important role in the process of licensing and recouping royalties as it may act  as the owner of the intellectual property (IP).

The Cyprus company will license the IP to various external and/or related international clients. All the net profits will  be taxed by the Cyprus Tax Authorities at 10% corporate income tax (except from a possible gain upon the sale of the intellectual property, which may under circumstances be exempt from corporate income tax).

Any foreign source tax that has been withheld can be credited against the payable Cyprus corporate income tax. Under the Cyprus’ treaty network [Double Tax Treaties] and/or the EU Interest and Royalty Directive [i.e. minimum 25% participation of the Cyprus Company in the U.K company], withholding tax over the royalty payments can be reduced, and in certain cases to 0% as in our structure with the U.K.

A foreign shareholder of the Cyprus IP Company will not suffer any dividend withholding tax in Cyprus from dividends paid by the Cyprus company according to the Cyprus Income Tax Law. Furthermore, if the Cyprus royalty company is held by an EU resident company, then dividends from the Cyprus company will have all the benefits of the 2003/123/EEC Parent Subsidiary Directive.

Summary of advantages of a Cyprus royalty company:

1. Large double tax avoidance treaty network.

2. The applicability of the EU Interest and Royalty Directive and other EU-Directives.

3. The lowest corporate income tax (10%) within the EU.

4. Possible corporate income tax exemption for gains upon the sale of IP.

5. No withholding tax on royalty payments.

6. No withholding tax on dividends to non-residents.

7. No withholding tax on interest payments to non-residents.

8. No capital tax over capital contributions into Cyprus resident companies.

9. No thin capitalization rules.

10. No Cyprus corporate income taxation over dividends/capital gains derived from the shares in
    Cyprus based companies by non-Cyprus shareholders.

11. Low capital requirements.

12. Fast incorporation procedures.

13. Low maintenance expenses.

For further information please contact us.