IP Box Calculator
Estimate the Cyprus IP Box benefit: the 80% deduction, the 20% taxable portion at 15% and your effective rate, with an optional nexus fraction.
How the profit is taxed
- Exempt (80% deduction)80.0%
- Taxable portion (20%)17.0%
- IP Box tax (15% on 20%)3.0%
Versus full corporate tax
The Cyprus IP Box treats 80% of qualifying IP profit as a deemed deduction, so only 20% is taxed at the 15% corporate rate — an effective rate of 3% on fully nexus-compliant income (2.5% before the 2026 rate rise). The nexus fraction reflects the qualifying R&D the company itself incurred; acquired IP and related-party outsourcing reduce it. Indicative only — qualifying status, income allocation and the nexus calculation should be documented and confirmed.
Disclaimer: These calculators provide general estimates based on the 2026 Cyprus tax framework and standard assumptions. They do not account for every personal circumstance, allowance or exemption and are not tax advice. Speak to us before acting on any figure.
How the Cyprus IP Box works
The Cyprus IP Box is one of the most competitive intellectual-property regimes in the EU. It grants an 80% deemed deduction on the net profit from qualifying intellectual property, leaving just 20% of that profit exposed to the 15% corporate tax rate. The result is an effective rate of around 3% on qualifying income. The regime is built on the OECD modified nexus approach, so relief is tied to the development substance behind the asset — the more R&D you carry out yourself, the larger the slice of profit that enjoys the deduction.
The calculation method
The mechanics are straightforward once the qualifying profit is established. The table shows the steps the calculator applies.
| Step | Treatment |
|---|---|
| Qualifying IP profit | Net profit after directly related expenses |
| Deemed deduction | 80% of qualifying profit |
| Taxable portion | Remaining 20% |
| Corporate tax rate | 15% |
| Effective rate | ~3% |
Worked example: €1,000,000 of qualifying profit
Take a software company with €1,000,000 of qualifying IP profit and a full nexus fraction.
- Deemed deduction: 80% × €1,000,000 = €800,000 deducted.
- Taxable profit: the remaining €200,000.
- Tax due: €200,000 × 15% = €30,000 — an effective rate of 3%.
Without the IP Box the same €1,000,000 would attract €150,000 of corporate tax, so the regime saves this business €120,000 in a single year. Read the detail in our IP Box regime guide or, if you run a software business, our IP Box for SaaS guide.
Related guides & services
Frequently asked questions
The regime gives an 80% deemed deduction on qualifying IP profit, so only 20% of that profit is taxed at the 15% corporate rate. That works out at an effective rate of around 3% on qualifying income — among the lowest IP regimes in the EU and the headline draw for technology businesses.
Qualifying assets are those covered by the OECD modified nexus approach, principally patents and copyrighted software. Marketing-related intangibles such as trademarks, brands and image rights do not qualify. The relief is therefore aimed squarely at genuine research, development and software activity.
The nexus approach links relief to substance. The qualifying fraction of profit reflects how much of the underlying R&D you carried out yourself or through unrelated parties, versus IP you acquired or outsourced to related parties. The more development you do in-house, the larger the share of profit that gets the 80% deduction.
Not fully. Because the nexus formula rewards your own development spend, acquisition costs and related-party outsourcing reduce the qualifying fraction. Two companies with identical IP profit can therefore receive different relief depending on how, and by whom, the asset was developed.
Copyrighted software qualifies, so well-structured SaaS and software businesses are typically strong candidates for the regime, provided the development substance sits in Cyprus. The key is documenting the R&D and ownership so the qualifying fraction stands up to scrutiny.
The 80% deduction is taken against the net qualifying profit from the IP after deducting directly related expenses. It is claimed through the company's tax computation, supported by records of the nexus calculation. Because the figures hinge on substance and documentation, most businesses confirm the position with an adviser.
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