cy-tax_calc / 2025Cyprus IP Box

Cyprus IP Box · Qualifying Companies

Who Qualifies for the Cyprus IP Box?

The Cyprus IP Box regime targets companies that earn income from qualifying intellectual property they developed through R&D. Below is a comprehensive breakdown of qualifying and non-qualifying company types — with real-world examples and the key factors that determine eligibility.

7

Qualifying types

1

Partial qualifiers

2

Non-qualifying types

SaaS companies

Qualifies

Software-as-a-Service companies are among the most natural beneficiaries. If your product is built on proprietary software you developed, subscription revenue derived from that software qualifies. This includes B2B SaaS, B2C apps, developer tools, and platform businesses.

Example

A B2B project management SaaS company earning €800,000 in annual subscription revenue. The core software is proprietary, developed in-house. Qualifying profit after costs: ~€600,000. Annual tax at 2.5%: €15,000 vs. €75,000 at standard rate.

Key requirements

  • Proprietary software developed through R&D
  • Software must generate qualifying income
  • R&D expenditure records maintained

Patent holders

Qualifies

Companies holding patents granted by any EU patent office, the European Patent Office (EPO), or equivalent national authorities qualify. Income from licensing those patents, royalties received, and capital gains from patent disposal all qualify.

Example

A medtech company holding 3 EPO-registered patents earning €1.2M in annual royalties from licensing agreements. After nexus calculation (85% in-house R&D): qualifying profit €1.02M. Tax saving: €88,500 per year.

Key requirements

  • Patent registered with qualifying authority
  • Income traceable to specific patent(s)
  • Nexus R&D expenditure documented

Mobile app developers

Qualifies

iOS, Android, and cross-platform mobile apps qualify as computer software under the regime. Revenue from app sales, in-app purchases, and subscription fees all qualify — provided the app was developed through R&D activities.

Example

An indie developer with a productivity app earning €250,000 annually through the App Store. Developed entirely in-house over 18 months. Near-100% nexus fraction. Effective tax rate: 2.5% on qualifying profits.

Key requirements

  • App developed through R&D activity
  • Revenue attributable to proprietary software
  • Developer timesheets available

AI and machine learning companies

Qualifies

Proprietary AI models, training pipelines, ML algorithms, and AI-powered products qualify when they result from genuine R&D. Income from AI API licensing, AI-powered SaaS, and AI model sales all qualify under the software and copyright categories.

Example

A computer vision API company earning €2M annually from API calls to a proprietary model. Developed through 3 years of documented R&D. Nexus fraction: 90% (some contracted R&D). Qualifying profit ~€1.5M. Annual saving: €131,250.

Key requirements

  • Proprietary AI/ML models developed through R&D
  • Technical uncertainty and systematic approach documented
  • Model training cost records maintained

Game developers and studios

Qualifies

Video game studios qualify when their revenue derives from proprietary game software. Qualifying income includes game sales, in-game purchases, licensing the game engine or IP to third parties, and esports licensing.

Example

An indie game studio with three titles earning €400,000 annually. All games developed in-house. Full nexus fraction. Effective tax: €10,000 instead of €50,000 — a €40,000 annual saving.

Key requirements

  • Game developed in-house or with unrelated contractors
  • Game engine/software constitutes qualifying IP
  • Revenue attributable to software IP

Semiconductor and hardware IP

Qualifies

Chip design companies, FPGA IP core developers, and hardware-embedded software companies qualify when they license their IP designs or receive royalties from hardware manufacturers. The IP component (not the physical hardware) qualifies.

Example

A fabless chip design company licensing RISC-V processor IP to manufacturers, earning €5M annually in royalties. The processor architecture is patent-protected and developed in-house. Effective tax: 2.5% on qualifying profit.

Key requirements

  • IP component clearly separable from physical hardware
  • Registered patents or copyright protection
  • Licensing income traceable to IP

Research and development companies

Qualifies

Pure R&D companies that commercialise their research through IP licensing qualify. This includes university spin-outs, deep-tech startups, and research-to-royalty businesses. The regime is specifically designed to incentivise this model.

Key requirements

  • Qualifying IP assets developed through R&D
  • Income from IP exploitation (not consulting)
  • OECD nexus calculation supports qualifying fraction

Consulting and services companies

Does not qualify

Pure consulting, professional services, or agency businesses do not qualify unless their income derives from proprietary IP assets they own. Bespoke service work — even if IP-intensive — typically does not generate qualifying IP income unless the deliverable is protected IP that is licensed back.

Key requirements

  • Would require proprietary IP generating independent income
  • Service fees alone do not constitute qualifying income

Holding companies without R&D

Does not qualify

A holding company that acquires IP from a related operating company — without conducting any R&D itself — will have a nexus fraction of zero. The Modified Nexus Approach prevents pure IP holding structures from benefiting without genuine economic substance.

Key requirements

  • Requires in-house or arm's-length R&D expenditure to generate a positive nexus fraction

Marketing and brand businesses

Partially

Businesses whose value is primarily in trademarks or brand assets do not qualify for the exemption on those assets. However, if the same business also owns qualifying software, patents, or copyrights that generate separate income, those assets and their income streams can qualify independently.

Key requirements

  • Qualifying IP income must be separated from brand/trademark income
  • Non-qualifying assets must be separately valued

The three qualifying tests

01

You own qualifying IP

The company must own or exclusively license patents, software, utility models, or qualifying copyrights.

02

Your income derives from that IP

The income being exempted must be traceable to specific qualifying IP assets — not general business activity.

03

You have R&D expenditure to support it

The OECD Modified Nexus Approach requires qualifying R&D expenditure. The more in-house R&D you have, the higher the qualifying profit fraction.

Full eligibility criteria →Detailed breakdown of every qualifying conditionRequired documents →What documentation you'll need for your applicationStart your application →Submit your details for a free eligibility assessment

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