Royalty Routing Through Cyprus

Cyprus is ideal for royalty routing structures, because as a jurisdiction it offers multiple advantages including competitive fees, fast incorporation and low capital requirements.

Other key advantages of Cyprus as a royalty routing jurisdiction are:

  • The cost of acquisition of the IP can be amortised for tax purposes.
  • No withholding taxes on payments of royalties to licensors outside Cyprus provided that the property is used outside Cyprus by the Cyprus onshore company.
  • Tax is only paid on the license fee retained by the Cyprus Company and the applicable rate is only 12.5% - one of the lowest in the Europe.
  • The license fee to be retained by the Cyprus Company will typically be 5%. So, the tax paid in a structure like that in our example below is a maximum of 12.5% on 5% of the income generated: i.e. a net 0.625%. The balance is routed to the offshore company in a zero tax or low tax area.
  • Any source tax withheld over the royalties received by the Cyprus Company is available as a tax credit against the Cyprus corporation tax on the royalty income
  • Cyprus has a vast worldwide network of double tax treaties, and since Cyprus’s accession to the European Union, the EU Interest and Royalty Directive may provide for 0% withholding taxes on royalty payments made by affiliated companies in different EU countries to the Cyprus Company.

Register or login to our Technical Resources Centre  and download the FREE technical report “Cyprus Royalty Company”.