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Proposed changes to the IP box scheme

Following considerable opposition from some countries to IP box regimes G20 leaders reached agreement towards the end of 2014 on a “modified nexus” approach that allows a taxpayer to benefit from an IP regime only to the extent that it can show material relevant activity, including a clear connection between the rights which create the IP income and the activity which contributes to that income. The “modified nexus” approach has since been endorsed by all OECD and G20 countries.
Under the proposal, countries that have IP regimes that are incompatible with the nexus approach are expected to take steps to amend them. There can be no new entrants to non-compliant IP regimes after 30 June 2016 but there may be transitional arrangements allowing taxpayers benefitting from existing arrangements to continue to do so until 30 June 2021.
The Ministry of Finance has recently announced plans to amend the Cyprus IP Box regime in line with the “modified nexus” proposal. It is intended that the changes will take effect by 1 July 2016. The initial announcement does not include details of the proposed changes or of any transitional arrangements. We will report these when they are made public.