Cyprus Royalty Routing Structures

Due to the low withholding tax rates for royalties provided in most of the Cyprus’ Double Tax Treaties and the use of the EU Directives, establishing a royalty company in Cyprus can be a very attractive proposition.

Royalties and licensing rights for intellectual property can be owned by or assigned to a Cyprus Company. Intellectual Property may include computer software, technical knowledge, patents, trademarks, trade secrets & methods, and copyrights.

Royalties and licensing fees for intellectual property can be owned by or assigned to a Cyprus Company. The Cyprus IBC can then enter into license or franchise agreements with other companies interested in exploiting these rights. Royalty payments from Central and Eastern European countries would normally be deductible expense in the source country and they will be subject to a 10% tax after deduction of expenses in Cyprus. The use of the Cyprus’ Wide  Double Tax Treaties Network and EU Directives reduces or eliminates the withholding tax on the collection of the Royalty payment.

Apart from the tax system’s generic features, the DTT Network and the adoption of EU Directives, other important tax system features beneficial to Cyprus Royalty Companies are the following:

  • Absence or reduction (under a Double Tax Treaty or the Interest and Royalty Directive) of withholding tax on royalties paid to Cyprus Company.
  • Low overall tax burden.
  • Tax deduction of royalty payments.
  • Effective tax depreciation of investments in intellectual property.
  • Absence of withholding tax on royalty payments (including to offshore companies) for rights used outside Cyprus - the usual case.
  • Neutral VAT treatment.
  • Reasonable level of "margin" required by tax authorities.
  • Effective protection of intellectual property rights by Legislation and the participation of Cyprus in international agreements.

Please contact us for more information:

Tax Structures can legally mitigate one’s tax liabilities. More information can be provided on request (contact us).