CYPRUS
generates royalties, then these profi ts can be distributed by way of dividends with minimum tax burden to non-resident shareholders, as any dividend income payable to non-residents shareholders is already exempt from tax in Cyprus.
Another main characteristic that should be noted is that damages and/or compensation awarded for any infringement of an IP right is also included in the 80 percent of the royalty profi t excluded from the corporate tax. Any threat of loss of money and/or time is to a great extent removed as this fact is a great incentive to IP right holders to protect their rights in court and not to think twice before doing so. T e benefi t of having any damages excluded from taxation is tremendous.
Exemption of profi ts
It should be noted that the tax treatment explained above also applies to profi ts from the future disposal and the sale of the IP rights. T is means that 80 percent of the profi ts from the disposal of such rights will not be subject to the corporate tax. T is is an extra incentive for future owners of such rights as a way to avoid some taxation burden.
Amortisation provisions
T e new amortisation provisions can be characterised as competitive and extremely favourable. T e new provision provides that the cost of acquisition or development of an IP right may be capitalised and amortised on a straight line basis over fi ve years, giving an annual writing down allowance of 20 percent.
T is is a considerable acceleration compared to the previous amortisation regime, where rates were determined by reference to the estimated useful life of the underlying asset.
For example, if a patent had a validity of 20 years its useful life would be deemed to be 20 years and the annual writing down allowance would
www.worldipreview.com World Intellectual Property Review e-Digest 2013 61
THE ACCELERATION OF WRITING DOWN ALLOWANCES WILL RESULT IN SUBSTANTIAL CASH FLOW BENEFITS BY REASON OF THE DEFERRAL OF TAX LIABILITIES.
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