Case Study: IP Box Holding Structure

Client Case

The owners of a technology business operating in the EU market approached us. The company actively invests in R&D and generates income from intellectual property. There are operating companies in Austria and Slovakia. Royalties are received by a Cyprus holding company.

Client’s objectives: to centralize IP and royalties at the holding level; to prepare for the application of the IP Box regime; to minimize tax and corporate risks; to ensure real substance and effective R&D management; to organize the relocation of key R&D specialists.

Key question: Is it necessary to establish a separate IP company (Intellectual Property company), or can the IP remain within the holding company?

Strategic Decision

Taking into account the actual R&D processes, IP risk management, and the presence of substance in Cyprus, the IP and royalties were retained within the holding company without creating a separate IP company. This simplifies the structure, accelerates compliance, and allows the “nexus” (the link between R&D and IP income) to be demonstrated precisely at the holding level.

What we delivered (roadmap)

1) 100% Cyprus holding
Incorporated a Cyprus holding as sole owner of the Austrian and Slovak subsidiaries.

2) Turnkey corporate setup
Provided registered office, secretary, director; opened bank accounts for the holding and the UBO in Cyprus.

3) Cross-border compliance & DTT
We organized the work of accountants, lawyers, and auditors in Cyprus and synchronized them with providers in Austria and Slovakia. Royalty, dividend, and service payments were properly structured using double tax treaties.

4) Holding-level substance (IP Box enabler)
Established physical office, IP-risk policies, and decision minutes. Built headcount/contracts in the holding to demonstrate that the holding:

• directs R&D (roadmaps, specs, acceptance of work),
• bears R&D costs (own / unrelated outsourcing),
• makes IP decisions (licensing, protection, upgrades).

Substance is not merely an “address and a director”; it is evidence that the company genuinely manages the business, makes key decisions, and bears economic risks.

5) Immigration & BFU
Obtained BFU permission to employ non-EU staff in the holding, reinforcing substance and IP-risk control in Cyprus.

6) Key staff relocation (R&D)
With a licensed broker, leased apartments in one building (central Limassol) and secured office space within walking distance. Completed lease legal work and utilities transfers, arranged school admissions.

7) IP Box at the holding + tax ruling
Contract auditors ran an IP Box assessment reflecting holding-level nexus and filed a tax ruling with Cyprus Tax. Target: confirmation and effective rate down to ~2.5% on qualifying IP income in Q1 2026 (actual rate depends on rules and qualifying spend at application).

8) Owners’ trust
Established a trust for asset protection, succession and governance.

9) Next step
Ongoing site selection & due diligence for a mixed-use (residential + office) development to serve current staff and future relocations.

Why no separate IP company?

• Real nexus sits in the holding: it funds/directs R&D and makes the IP calls.
• Lower admin load and faster compliance (single entity).
• Cleaner audits: IP documentation, costs and decision logs in one place.

If later the scale changes or investors come in at the IP level, we can spin out an IP-Co without losing the audit trail already built in the holding.

Results (to date)

• Operational holding-level IP & royalty model in Cyprus.
• Substance evidenced via office, people and processes inside the holding.
• Tax ruling filed; IP Box application targeted for Q1 2026.
• Accounting/audit aligned across three jurisdictions; relocation completed.

Feod Group — Your Legal Partner in Cyprus

Feod Group is an international law firm providing services in Cyprus since 2007. The firm combines the expertise of licensed Cypriot advocates, international lawyers, and industry experts and delivers comprehensive legal, corporate, tax, and immigration services. With us, clients receive a single integrated service package without transferring projects between multiple providers.

If you require consultation on Cyprus taxation or support in a specific situation, please contact us.

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