Cyprus offers a very useful IP tax regime. The law provides for a certain tax exemption for income derived from intellectual property. More specifically, 80% of the worldwide royalty income generated from IP owned by a Cyprus tax-resident company (net of direct expenses) is exempt from income tax. In addition, 80% of profits generated from the disposal of IP owned by Cyprus-resident companies (net of direct expenses) is also exempt from income tax, and any expenditure of a capital nature for the acquisition or development of IP is tax-deductible in the year in which it was incurred and the four subsequent consecutive years.

Cyprus' IP tax regime
The Republic of Cyprus provides the following tax regime for intellectual property royalty structures based on Cyprus-resident legal vehicles.

80% of worldwide royalty income generated by IP owned by Cyprus-resident companies (net of direct expenses) is exempt from income tax.
80% of profits derived from the disposal of IP owned by Cypriot companies (net of direct expenses) is exempt from income tax.
The cost to a Cyprus-based company of acquiring or developing an IP right may be capitalised and written off on a straight-line basis over five years, giving an annual writing down allowance of 20%.
Thus, the effective tax rate for a Cyprus-registered royalty company is 2.5% or less, taking capital allowances and expenses into account.