Cyprus Royalty Company

Why a Cyprus Royalty Company?     
 

Royalty companies are favoured because income from royalty or royalty routing is included in the calculation of the taxable profits of a Cyprus tax-resident company which are subject to the low tax rate of 10%.

Under the provisions set by Cyprus treaty network an/or the EU Interest & Royalties Directive, royalty payments will be received in Cyprus with either reduced or no withholding tax.

Any source tax withheld over the royalties received by the Cyprus Royalty Co. is available as a tax credit against the Cyprus corporation tax on the royalty income.

Royalty payments made by the Cyprus Royalty Co. to an Offshore Co. will not be subject to withholding tax in Cyprus, provided the right to use the royalty is granted for use outside Cyprus.

The cost of acquisition of the Intangible Property can be amortised for tax purposes.

 

 

Scenario 1

 

Cyprus Royalty Co. Owns the IP *

Scenario 2

 

Cyprus Royalty Co. Sub-licenses the right to market the IP * from Offshore co.

Royalty received from foreirn customer € 1000 € 500
Royalty Paid to Offshore Co - € 950
License Fee (say 5%) - € 50
Net Income € 1000 €50
Net taxable € 1000 € 50
Corporation Tax (10%) € 100 € 5
Withholding Tax on Royalties received € 0 (usually) € 0 (usually)
Withholding Tax on Royalties paid out - -
Withholding Tax on Dividends paid out - -
Total taxation payable € 100 € 5
Total available for dividend distribution € 900 €450

 

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