When you come up with an out-of-this-world or even with a practical idea that - surprisingly enough - no one has ever come up with before in relation to a product or a service there will always be some people who will want to duplicate your success and sell your ideas as their own. Some even go as far as registering your ideas and you end-up with a big-fat-nothing. Intellectual Property (IP) provides the best means of protecting your idea. Actually, IP offers more than mere protection to an idea or a concept; it provides a genuine business asset that may be integral to the core services of the business and overall long-term viability.

WHAT IS INTELLECTUAL PROPERTY?

Intellectual Property is any form of original creation that can be bought or sold - from computer software to a movie. In general, IP may be something you have invented, like a product; it may be a brand or logo, a scientific discovery or literary and/or artistic work, like photography. The main types of intellectual property, as defined in the IP legislation, are the followings:

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  • Copyrights, which may take any of the following forms of Literary works, Dramatic works, Musical works, Scientific Works, Artistic works, Sound recordings, Films, Broadcasts, Published editions, Databases, Publications, Software programmes;
  • Patented inventions; or
  • Trademarks (and service marks), designs and models that are used or applied on products.

The above is a non-exhaustive list.

WHY SEEK PROTECTION?

The times we live in are proving increasingly competitive towards protecting your intellectual property rights. Undoubtedly, almost all businesses have benefited from the Internet and e-commerce, where products, services and marketing communications can reach vast audiences at relatively low costs; nonetheless, the continuous development of the Internet has also increased the chances of IP theft.

IP theft has an adverse impact on innovation, commercialization of new products and overall economic success. Although there is a general belief amongst small and/or medium sized Companies that IP registration and protection is vital only for big Multinational Corporations; this is mistaken. Companies of all sizes are at risk of having their unique ideas, products or services stolen, even if they are on the other side of the world, making IP protection more important than ever.

REGISTRATION AND MANAGEMENT OF IP

Having said all the above, choosing the right location for the registration and management of your IP is a vital strategic business decision. The ideal location to establish an IP structure is one that can serve the organization's business strategies/model, safeguard and protect its IP and contribute to its tax optimization. Unsurprisingly, Cyprus offers all the above.

Cyprus is a small sunny island in the East Mediterranean Sea. Yet, despite its limited geographical size it has always been the centre of attention as it stands at the crossroads of three continents, Europe, Asia and Africa. Cyprus, with its strategic location, its excellent business infrastructure, the drawing of double taxation treaties with more than 50 countries, including China, with advantageous provisions, the widespread use of the English Language and the Common Law legal system have attributed to Cyprus becoming a well renowned International Business Centre.

The Cyprus legal system has been developed to ardently safeguard IP rights. This is not only evident at a national level, but membership of the European Union and the conclusion of numerous international conventions, provide IP protection at European and international levels to. Cyprus is signatory to, amongst others the following international conventions:

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TAXATION

In May 2012 Cyprus introduced a package of measures to promote economic growth. The most notable of these is a series of incentives and exemptions relating to investment in intellectual property rights, commonly known as an intellectual property rights box ("IP box").The IP Box provides attractive opportunities for structuring the exploitation of your IP assets and has given Cyprus a competitive advantage compared with other jurisdictions such as Luxembourg, the Netherlands, Ireland and the United Kingdom, which have implemented similar "IP boxes".

The principal features of the Cyprus IP Box are the following:

  • The cost of acquisition or development of an IP right may be capitalized and amortised on a straight line basis over five years, giving an annual writing down allowance of 20%;
  • 80% of the profit earned from the exploitation/use of the IP rights (including any compensation for improper use) is exempt from income tax;
  • 80% of profit generated from the disposal of IP owned by Cypriot resident companies is exempt from income tax;
  • Any dividend income generated out of royalty income earned by a Cyprus company and paid to its non-resident shareholders is fully exempt from Cyprus tax of any description.
  • Disposition of the shares of the Company owning and/or exploiting the IP rights is exempt from all forms of taxation in Cyprus.

The corporation tax rate applicable in Cyprus is 12,5%; one of the lowest in EU. Thus, when applying the corporate income tax rate of 12,5% on the 20% of the profits earned from the use of IP rights (as 80% is deductable) you are finally left with an effective tax rate of 2.5%. It's worth noting that the amount subject to tax under the above provisions is calculated by deducting the writing down allowance, the costs (including interest) of financing the acquisition or development of the assets and any other direct expenses from the revenue earned. Given that generous deductions are available against gross income, the effective rate should generally be well below 2.5%, which is half the rate offered by the next most attractive scheme (the Netherlands).

OUR SERVICES

We can assist and advise you an all aspects of Intellectual Property. In particular we can provide for the registration of your trademark, patents, designs and copyrights in Cyprus, Europe and internationally; assist you at every step to secure the protection of your rights, both at national, European and international level; assist you in tax related issues; provide for the incorporation of a Cyprus royalty Company and for the management and administration of such a Company.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.