While Cyprus is generally considered to be an attractive proposition for individuals looking to register Intellectual Property (IP), it often gets overlooked for more well-known jurisdictions, such as the likes of the Netherlands and the United Kingdom (UK). There are multiple reasons behind this, with arguably the most significant being the fact that the two aforementioned jurisdictions have had a larger and longer presence in the IP sector than Cyprus has. However, overlooking Cyprus and the benefits it proposes would strip investors of the opportunity to take advantage of the three key benefits it offers. The three benefits at hand are: the convenience of registering IPs in Cyprus, the security of doing so, and the plethora of tax benefits available.
What is Intellectual Property?
Prior to delving into the three key benefits, it is first worth understanding what exactly IP entails. In a nutshell, IP is a form of intangible property, consisting of the creations, ideas and concepts which are developed by individuals, or Companies for that matter. They are intangible in the sense that they cannot be ‘touched’ or ‘interacted with’ in the same manner in which a car, for example, or an apartment can. Instead, they are registered with an IP authority, so that ownership (and by extension the rights associated with it) all belong to its creator. There are generally four types of IPs which can be registered all around the globe, and they are:
- Copyright – consist of literature (i.e. written work), paintings, songs, software codes, among other forms of artistic work;
- Trade Marks – consist of logos, distinctive names, and even certain symbols which Companies use to identify themselves with;
- Patents – consist of the right to produce, sell or use the product or creation in question, which has been registered;
- Trade Secrets – consist of processes, designs, practices or compilations of information which offer value to its owner due to the fact that they consist of information which is not general knowledge, nor made readily available.
Cyprus, by virtue of being a Member State of the European Union (EU), benefits from having its registered IPs being automatically registered as EU IPs in the European Union Intellectual Property Network (EUIPN) databases. This means that by simply registering an IP in Cyprus, it instantly becomes a registered EU IP as well. This consolidates the application process of an IP considerably, since it alleviates the requirement of registering the IP twice, as is the case in certain other jurisdictions. Instead, one application with Cyprus’ Intellectual Property Office will, if granted, lead to the creation of an EU IP. However, worth noting is that separate applications will be needed for each type of IP being registered. To illustrate, an individual cannot use a single application to register a Copyright as well as a Patent.
This aspect is once again linked to Cyprus’ membership of the EU. This is because EU IPs offer considerable advantages, such as the peace of mind knowing that a successful registration of an EU IP means that it is protected in all of the EU’s twenty seven Member States. For instance, if an individual were to register their IP in Cyprus, and a Company in Belgium were to infringe on these rights, the individual would be able to reinforce their rights in the EU courts. As such, an EU IP would benefit from being incorporated in the EU’s IP catchall database, providing its owners with a sense of security, since the IP is protected and acknowledged in more jurisdictions than just Cyprus.
Cyprus is often regarded as having one of the world’s most attractive tax systems. This notion extends to Intellectual Property related tax. To illustrate, 80% of income generated from IPs which are owned by Cypriot Companies (after deducting costs, such as the fee for acquiring and developing the IP in question) is exempt from income tax.
The same 80% exemption also applies to profit generated from the disposal of an IP owned by a Cypriot Company. When coupled with the fact that Cyprus offers a low corporate tax rate of 12.5%, it comes as no surprise that the effective tax rate can be reduced to 2.5%.
There are a handful of ‘tax havens’ around the globe, but only a fraction of them offer the same benefits which Cyprus does, and even less offer superior benefits. What makes Cyprus unique, however, is the fact that its IP structure offers a simple registration process, the benefits of owning EU protected IP, while at the same time having the ability to take advantage of low tax rates. Moreover, Cyprus’ IP structure offers an alternative avenue for individuals whose businesses may have been affected by the recent COVID-19 pandemic, or by the uncertainty of the proposed changes to Cyprus’ Double Tax Treaty with Russia.
This Article and any content forming part of it is only intended to provide a guide on the subject matter and does not constitute legal or any other advice. If professional advice is required, G.C Charalambous & Co LLC would be glad to assist you in this respect.