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Cyprus is known as a very attractive jurisdiction for the establishment of Royalty companies and holding structures in general. For professional assistance and advise please contact [email protected].
Cyprus provides unilateral tax credit for any tax withheld overseas on the payment of Royalties (as well as dividends and interest). Thus the tax in Cyprus can be reduced to a very low amount or zero in most cases.
Royalties paid by Cyprus companies to overseas are not subject to any withholding tax (as per Cyprus Law) except where the source of the Royalty is Cyprus. Zero withholding tax also applies to payment by Cyprus Government for dividend and interest to non residents.
Starting a royalty company in Cyprus you will find that this is an excellent idea, taking into account the zero or low withholding tax rates on royalties which the majority of the Cyprus’ Double Tax Treaties provide, along with the provisions of the EU Interest & Royalty Directive.
Once the royalty rights are assigned to the Cyprus Company, the Cyprus Company will then be able to franchise or license these rights to various companies. EU Interest and Royalty Directive and Cyprus’ Double Tax Treaty network will reduce or even abolish the withholding tax on the Royalty payment.
Cyprus Company is the owner of the Intellectual Property right which is then been licensed to the Russian entity.
Cyprus Company retains a license fee and pays tax on this income but it will be able to pass 95% to the offshore company where no further tax will be levied. Thus, effectively taxed on the retained commission fee, say 5%.
Note: No tax shall be paid on the offshore company level as this will be a zero tax jurisdiction.