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1 September 2013CopyrightChristodoulos Vassiliades.

Tax breaks: IP incentives in Cyprus

Cyprus IP legislation has been widely developed in the past two decades. Cyprus’s accession to the EU on May 1, 2004 resulted in numerous IP reforms which were necessary for adherence to the acquis communautaire. Legislation was harmonised to meet the demands of the Community and Cyprus officially became a member of the Office for Harmonization in the Internal Market (OHIM).

IP protection in Cyprus is essentially divided into two categories:

a)            Industrial property, which includes trademarks, industrial designs and patents; and

b)            Copyright, which includes literary and artistic work.

Trademarks

The Trade Marks Law Cap 268 and its amendments govern trademarks and their registration in Cyprus. By passing the Trade Marks (Amendment) Law 176/2000, the government has implemented the EU Council Directive 89/10/EEC and brought Cypriot trademark legislation in line with European trademark legislation.

Designs

The registrability of a design depends on its being appealing to the eye in terms of aesthetics. Its registration does not protect the technical features of the product. Previously, no independent statutory vehicle existed for registration of designs in Cyprus as the UK Designs (Protection) Law applied. Subsequently however, the Law on the Protection of Designs and Models No 4(I)/2002 adopting the provisions of EU Directive 98/71 was passed. Designs may be protected for an initial period of five years. This is renewable every five years up to a maximum duration of 25 years.

Patents

Until 1998, the registration of a patent in Cyprus required registration in the UK. Subsequently however, the Patents Law of 1998 as supplemented by Regulation 46/1999 came into effect. This law was further amended by Laws 21(I)/1999, 153(I)/2000 and 163(I)/2002.

In particular, Law 153(I)/2000 introduced supplementary protection certificates in respect of plant protection products and Law 163(I)/2002 harmonised the Cyprus basic law with European Directive 98/44 on the protection of biotechnological inventions. Patent protection is conferred for 20 years from the date of filing of the application and is subject to the payment of an annual maintenance fee.

Copyright

Copyright is protected by the Intellectual Property Law 18(I)/1993 as amended by Law 128(I)/2002. The amending law has adopted various EC directives, bringing Cypriot legislation in line with European copyright law.

The 2004 amendment establishes a new type of copyright within the framework of the information society. It expands the legal protection afforded in relation to reproductions and contains new provisions on interactive, on-demand broadcasting and rights-management information. In an effort to combat copyright infringement, a further development is the substantial increase in the amount of fines and the term of imprisonment imposed on persons infringing copyright.

Tax reforms

Further IP developments include tax reforms in 2012. More specifically, the Cyprus Income Tax Law has been amended to provide generous exemptions from tax of income related to IP. These include:

1.  80 percent of any income generated from IP owned by Cypriot resident companies (net of any direct expenses) will be exempt from income tax;

2.  80 percent of profit generated from the disposal of IP by Cypriot resident companies (net of any direct expenses) will be exempt from income tax;

3.  The definition of IP includes all intangible assets, including copyrights, patents and trademarks; and

4.  Any expenditure of a capital nature for the acquisition or development of IP will be claimed as a deduction in the tax year in which it was incurred and the immediate four following years on a straight-line basis.

Bearing the above in mind and coupled with the fact that Cyprus companies are taxed at the rate of 12.5 percent of their net profits, (so long as it is proved that the company has its ‘management and control’ in Cyprus), it is evident that it is beneficial for Cyprus companies to own IP.

Further, since Cyprus is a member of the EU and the Madrid system and has ratified both the agreement and protocol, one may take advantage of the new tax laws to use Cyprus as the ‘home’ registration of an international trademark application and designate other countries accordingly,

The increase, importance and value of IP assets in the last two decades has increased the risk of IP rights infringement by other competing businesses, which can of course result in damage for IP owners. Not only are IP rights in Cyprus comprehensively safeguarded but also, due to Cyprus’s accession to Europe, these laws are reviewed and conscientiously updated in order to keep abreast of developments in this area. n

Christodoulos Vassiliades is the founder and managing director of Christodoulos G. Vassiliades & Co LLC. He can be contacted at cgv@vasslaw.com

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