Cyprus R&D tax incentives.
Deduct more than you spend on qualifying R&D. Combined with the 3% IP box, Cyprus is one of Europe’s most R&D-friendly tax regimes.
The short answer
Cyprus gives companies an enhanced deduction for qualifying R&D expenditure — more than the amount actually spent — and taxes qualifying IP profits through the IP box at an effective 3%. Other company profits are taxed at 15%.
- IP box effective rate
- 3%
- Corporate tax
- 15%
R&D incentives in Cyprus — how they work together
The Cyprus R&D deduction and IP box regime are designed to work together as a complete innovation incentive package. You receive a 120% deduction on the front end — reducing the cost of developing IP — and then a 3% effective corporate tax rate on the back end when that IP generates income.
For a technology company spending €500,000 per year on software development, the 120% deduction saves approximately €15,000 in additional tax (20% uplift × 15% CT rate). When the resulting software generates licensing royalties, those royalties are then taxed at 3% under the IP box. The combined effect is a significantly lower overall tax cost for innovation activity.
Does your R&D qualify for Cyprus tax relief?
Ask Taxerly about R&D expenditure assessment, claim preparation and combined 120% deduction and IP box strategy.
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