Selling online courses by subscription (The user pays a monthly subscription and get a license to access the courses) + tutoring support, can it be considered within the IP BOX in Cyprus? Thank you.
Cyprus IP Box and Online Courses Memberships
- Thread starter MarkusCostigan
- Start date
- Status
Short answer: no way because an online course isn't considered a qualified asset and even if it did, you are missing qualifiying expenditure defined as the sum of all R&D costs incurred during any given tax year wholly and exclusively for the development, improvement or creation of qualifying intangible assets.
https://ipbox.cy/
https://ipbox.cy/
Yes. Coding courses + mentorship.
For convenience, I use third party platforms to manage subscriptions where users see the courses (for example Thinkific, Teachable etc...).
For convenience, I use third party platforms to manage subscriptions where users see the courses (for example Thinkific, Teachable etc...).
Has anyone on this forum actually used the Cyprus IP box incentive in their business? It would be great to hear the timeline, the actual steps to ensure the 80% exemption, setbacks during the process if any, and recommendations of advisors to handle the whole process.
First you need to examine whether the IP falls within the definition of qualifying assets of the Cyprus IP Box. Please explain what type of intellectual property you own or intend to develop so that we can advise. Happy to PM as well if you have specific questions
Thanks. It is specialized software to be licensed to companies operating in a specific online industry, not related to adult or crypto. Is getting a pre-approval from the tax authorities required in order to apply the ip box? how long does it take? which are the most likely reasons for disallowing the︀ application of the incentive? are there any known cases when the exemption was initially granted︁ but later withdrawn, causing payment of additional taxes and/or penalties?
Thank you, just to clarify - I assume that the pre-approval you mention relates to the tax ruling application. If so, this is︀ not mandatory and not required by law. However, it is the recommended course of action︁ to make sure that the Tax Office will not challenge the tax status at a︂ later stage.
For a positive outcome of the tax ruling the application needs to be︃ supported with evidence that the IP is a qualifying asset under the Regime and that︄ the R&D expenses are subject to capitalisation in accordance with IAS 38 (International Accounting Standard︅ 38). As such, to make sure that a positive outcome is achieved a detailed reference︆ to accounting standards needs to be made showing eligibility for capitalisation of R&D costs.
From experience, once the tax ruling returns with a positive outcome this cannot be annulled and︇ will grant the company indefinite protection.
For a positive outcome of the tax ruling the application needs to be︃ supported with evidence that the IP is a qualifying asset under the Regime and that︄ the R&D expenses are subject to capitalisation in accordance with IAS 38 (International Accounting Standard︅ 38). As such, to make sure that a positive outcome is achieved a detailed reference︆ to accounting standards needs to be made showing eligibility for capitalisation of R&D costs.
From experience, once the tax ruling returns with a positive outcome this cannot be annulled and︇ will grant the company indefinite protection.
Thank you CyprusBusiness. Yes, I apparently meant the tax ruling.
Your info is great, thanks. I wonder if there is anyone on this forum who implemented︄ it in its own business? E.g. an IT company owner? it would be great to︅ hear the first-hand experience of businesses on Cyprus ip box.
Your info is great, thanks. I wonder if there is anyone on this forum who implemented︄ it in its own business? E.g. an IT company owner? it would be great to︅ hear the first-hand experience of businesses on Cyprus ip box.
Thank you for your kind words. We have assisted many clients with securing a tax rulling. The only downside and potential issue we faced so far was that certain group companies owning a Cyprus IP company implemented an aggressive scheme of re-charging expenses and recognising excessive royalty income on︀ Cyprus level (without the existance of a trasnfer pricing study) and without 100% commercial sense.︁ These actions were sought by the foreign tax office as an aggressive tax scheme and︂ depending on the case the foreign tax office may revoke DDT and try to tax︃ the income locally.
Thank you CyprusBusiness︀ again. So essentially any problems that you encountered were from the foreign tax office, not︁ the Cyprus tax authorities?
When you say –
revoke DDT – you mean they charged︂ withholding tax on the royalties, even though they should be exempt from taxation under the︃ tax treaty?
tax the income locally – disregard royalties as deductible expenses in the foreign︄ country and recognize them as income of the company which paid royalties?
Do you mind︅ sharing foreign tax offices of which countries attempted such actions, in your experience?
When you say –
revoke DDT – you mean they charged︂ withholding tax on the royalties, even though they should be exempt from taxation under the︃ tax treaty?
tax the income locally – disregard royalties as deductible expenses in the foreign︄ country and recognize them as income of the company which paid royalties?
Do you mind︅ sharing foreign tax offices of which countries attempted such actions, in your experience?
We had just a couple of cases that the︀ 2.5% IP Box regime was conceived by the foreign tax office as tax aggressive scheme︁ and all related to German tax office. Of course, these cases were high profile clients︂ involved in the energy and aviation sector.
Yes, your understanding is correct regarding WHT and︃ DDT annulment, but do note that these were high profile cases that ended up in︄ court. The end result was for the German tax office to accept the DTT provisions︅ in exchange for the Group to become liable for a 12.5% Cyprus corporation tax so︆ that no German WHT be applied as a settlement.
Aside from this we faced no︇ other incidences with any foreign tax office.
Yes, your understanding is correct regarding WHT and︃ DDT annulment, but do note that these were high profile cases that ended up in︄ court. The end result was for the German tax office to accept the DTT provisions︅ in exchange for the Group to become liable for a 12.5% Cyprus corporation tax so︆ that no German WHT be applied as a settlement.
Aside from this we faced no︇ other incidences with any foreign tax office.
Why nobody mention that for IPBox you need to pay salaries to developers in CY and have real physical office. Only then you can calculate your IPBox profits based on the money you have spent on development (full salaries with taxes and social contributions, etc).
It's not like you can come to CY and say "hey I've developed this software and want all profits to be taxed at 2.5%".
It's only valid option for real software companies with development staff inside Cyprus, not one person companies.
Correct me if I'm wrong here.
It's not like you can come to CY and say "hey I've developed this software and want all profits to be taxed at 2.5%".
It's only valid option for real software companies with development staff inside Cyprus, not one person companies.
Correct me if I'm wrong here.
must be something our experts from Cyprus can answer @CyprusLaw , @CyprusLawyer101 , @CyprusBusiness
- Status