A tax rate of around 3% on income from your innovation
The Cyprus IP Box lets companies deduct 80% of the qualifying profit they earn from intellectual property such as patents and copyrighted software. Only the remaining 20% is taxed at the standard corporate rate.
Since 1 January 2026 the Cyprus corporate tax rate is 15% (up from 12.5%), following the country's 2026 tax reform. The IP Box itself was kept unchanged, so the effective rate on qualifying IP profit is now about 3% (15% × 20%), compared with about 2.5% before. That still makes it one of the most competitive IP regimes in the European Union.
Which intellectual property qualifies
The regime covers intangible assets that result from genuine research and development:
- Patents, and assets with similar legal protection such as utility models.
- Copyrighted computer software – the main category for software, SaaS and tech businesses.
- Orphan drug designations and supplementary protection certificates.
- Other non-obvious, useful and novel IP for smaller businesses, where certified by the competent authority.
Marketing-related assets do not qualify. Trademarks, brand names and customer lists fall outside the IP Box.
Qualifying income can include royalties and licence fees, the IP-related portion of product or service sales, compensation for infringement, and gains on disposal of the asset.
Who it suits and what you need to qualify
The IP Box works best for software and SaaS companies, tech start-ups, app and game developers, and businesses that own patents and develop them in Cyprus.
To claim the benefit, a company typically needs:
- Real substance in Cyprus – developers or R&D staff on the payroll, and key decisions taken locally.
- Cost tracking per asset – R&D expenses recorded separately for each qualifying asset, split between in-house, independent and related-party work.
- Proper documentation – records linking income to each asset and supporting the nexus calculation.
- Correct tax filings – the deduction is claimed in the annual corporate tax return.
Large multinational groups with revenue of €750 million or more are subject to the 15% global minimum tax (Pillar Two), which limits the IP Box benefit for them. For small and medium-sized businesses, the regime works in full.
How Aerotrust Limited can help
The IP Box offers real savings, but only with the right structure and records from day one. Aerotrust Limited supports you at every step:
- Assessing whether your IP and activities qualify.
- Setting up or restructuring your Cyprus company to hold and develop the IP.
- Building cost-tracking and accounting systems per qualifying asset.
- Calculating the nexus fraction and qualifying profit each year.
- Preparing financial statements and tax returns that claim the deduction correctly.
Contact us for an initial consultation and find out how much your business could save.