An amendment to the Income Tax
Law (the ‘Law’) was voted by the Cyprus Parliament on 7 July 2022 in order to allow for an increased tax deduction on
the actual expenditure incurred for scientific research as well as research and
development.
According to the amended Law, expenses
for scientific research and those for research and development, as recognized
on the basis of the international accounting standards, will qualify for an increased
allowance of 20% for tax purposes, thus giving a 120%
total deduction from taxable income.
Such expenses will need to be incurred
by a person carrying on a business. Furthermore, that person needs to have the economic
ownership of the intangible asset/s that will or may be derived from the
activities on which such expenditure is incurred.
The increased deduction will
also apply on expenditure of a capital nature, for which capital allowances
will be claimed.
The enhanced allowance will
not be granted in cases qualifying for the so called IP Box Regime, considering
the fixed 80% exemption of profits to which they are entitled.
