The issue

A Cyprus company was the owner of valuable mobile software (IP) used by millions of users in Central Europe. The IP was owned, managed and exploited via a Cyprus company. Once the software reached maturity, the client decided to dispose the software to a third party for a significant consideration.

The company’s advisors calculated the profit generated at the disposal of the IP and applied the standard corporate income tax rate of 12,5%. The client approached us to review the transaction and provide our comments.

The solution

Upon review of the transaction and the supporting documents, we identified that the disposal of the IP was subject to the old Cypriot IP Regime and the company could claim the exemption of 80% on the profit, thus being subject to an effective tax rate of 2,5%!

Moreover, we identified that the company was able to further eliminate the Cypriot tax liability via a foreign withholding tax applied on the disposal proceeds.

Result

The client was able to eliminate its Cypriot tax liability and save a significant amount from the disposal proceeds.

Contact us

Should your circumstances resemble the above, we are at your disposal to assist you and discuss your own circumstances.

More information on the new Cypriot IP Regime here.

Constantinos Markou
Director
Head of Tax Services
markou@atca.com.cy
+357 25661717