Home Who It's ForCyprus Company Formation for IT Consultants and Software Agencies

Cyprus Company Formation for IT Consultants and Software Agencies

A Cyprus company for IT consultants and software agencies is usually bought for one of two reasons: a client that will only contract with an EU-registered supplier, or a tax bill that has outgrown its home country. Neither decides whether the move works. The duller questions do: who owns the code when the invoice is paid, whether the IP incentives reach what you build, and whether your VAT survives clients in Berlin, London and Austin in the same month.

A Cyprus LTD gives the work an EU-registered supplier that procurement can contract with, and the corporate rate is 15% from 2026.[6]

What it does not do is settle who owns the code when the invoice is paid, or whether the intellectual-property incentives you have read about apply to what you build. Those turn on your contracts and on what your own engineers actually did.

So six questions, in the order they bite.

How it works

Who owns the code when the invoice is paid

Cyprus runs the opposite way to the UK and the US: commissioned work transfers to whoever ordered it by default, signed or not, unless you agree otherwise.

Most agencies arrive with an instinct borrowed from the UK or the US: a contractor keeps copyright in what they build unless the contract assigns it. Cyprus starts from the opposite position for commissioned work.

Copyright belongs first to the author. But where creation of a work is undertaken to the order of a person or organisation that is not the author's employer, under a contract for services, the copyright is deemed to have been transferred to whoever commissioned it, subject to any agreement between the parties excluding or limiting that transfer.[1]

Read that in both directions before you sign anything[1]

The developer you subcontract transfers to you by default
The client who commissions a platform from you takes it by default tooFine when that is what you sold, and expensive when you assumed you were licensing a reusable core.

No signature is needed for that transfer: That deemed transfer is expressly carved out of the rule that an assignment of copyright or an exclusive licence is invalid unless made or granted in writing. So it happens whether or not anyone signed anything, and an agreement excluding or limiting it is effective on its own terms, "subject to any agreement between the parties", with no writing requirement attached.[1][2]

The moment IP ownership becomes urgent is always the worst moment: an acquirer's lawyers, an enterprise client's procurement review, or an investor's data room. Build the chain deliberately instead, and keep two different rules apart while you do it.

What does need writing to be valid[2]

Buying in a third-party component by assignment or under an exclusive licenceOnly those two forms need writing. Most components arrive under a non-exclusive licence instead: open source, a commercial SDK, click-through terms. Those can be written, oral, or inferred from conduct.
Taking an exclusive licence from a founder personally
Granting an exclusive licence to a client

For those, writing is a validity rule rather than a nicety. Everything else is evidence.[2]

That is not licence to leave it verbal: An unwritten carve-out you cannot prove two years later is, in practice, no carve-out at all. "We always reuse our framework" is not an agreement, and an agreement nobody recorded is one you will not be able to prove in a data room.

Protection itself needs no registration. It turns on the work being fixed in material form and being original, with the express addition that recognition of protection does not depend on the application of any further criterion. The register cannot rescue a chain your contracts did not build.[3]

Software sits squarely inside that: literary works are protected "including computer programs", while ideas, procedures, systems, methods of operation and principles sit outside protection altogether.[3]

Our partner law firm provides legal advice on the contract structure; CyPRO One coordinates that engagement and keeps the documents in one place in your client portal rather than in three inboxes.

What the IP Box is worth, and who is allowed to advise you on it

As low as 3% from the 2026 tax year, not the 2.5% older articles quote. And 3% is a floor, not a rate. A licensed advisor gives the advice; we coordinate it.

The IP Box works as a deduction: 80% of the qualifying profits generated from a qualifying intangible asset comes out, and a person may waive all or part of that deduction for any tax year. The 20% that remains is taxed at the ordinary corporate rate.[4]

80%of qualifying profit deducted

20%of that profit left in charge

15%the corporate rate applied to the 20%, from 2026

3%of qualifying profit — what the arithmetic gives from the 2026 tax year

[4][6]

Changed 1 January 2026

The same arithmetic at the old 12.5% corporate rate produced the 2.5% that every article written before 2026 still quotes. What moved is the rate applied to the remaining 20%; the 80% deduction did not change.[6][5]

Treat 3% as a floor rather than a rate, because two filters sit in front of it.

The two filters in front of it

The nexus approach[12]The relief is 80% of the net profit calculated on the nexus approach, so how much of your profit qualifies depends on the research and development the business itself carried out. A company that bought or outsourced the work does not reach the floor.
Income from an intangible asset, not revenue in general[12]It relieves royalty income, embedded income and other qualifying income. An agency invoicing days at a day rate has no IP income to relieve, however much code those days produce.

Two more details about what qualifies

What qualifies is set by Regulations, not by the statute[4]What counts as a qualifying intangible asset, and how qualifying profits are computed, are set by Regulations from the Council of Ministers, which makes eligibility a technical determination rather than a reading of the statute.
A different provision can take precedence[4]Where an asset could fall within both the IP Box and the separate deduction for spending on intangible assets under the Patents, Copyright and Trade Marks Laws, the Law directs that the other one applies instead.

And if the computation produces a loss: Where the computation produces a loss rather than a profit, the amount that can be set off and carried forward is restricted to 20% of it.[4]

Who actually gives the advice: CyPRO One does not give IP Box advice itself. It is a coordinator and platform, not a licensed tax practice. The advice comes from a licensed Cyprus tax advisor working under their own professional responsibility, and we coordinate that engagement and stay your single point of contact.

Why the R&D uplift and the IP Box are an either/or

An extra 20% deduction on R&D spend for 2025 to 2030, but never on an asset the IP Box has been applied to in any year. One regime or the other, per asset.

The 2026 reform added something narrower and more immediately useful to a services-heavy software business.

How the extra 20% works[4][5]

An additional deduction equal to 20% of the expenditureFor expenditure incurred in the years 2025 to 2030 inclusive, including capital-nature expenditure deductible as an intangible.
A person may waive it in part or in full for any tax year
Given in the year the expenditure is incurredExcept for capital expenditure, where it follows the years over which the intangible deduction runs.

Then the sting: The extra 20% is refused for expenditure relating to a qualifying intangible asset for which the IP Box has been applied in any year, the current one included. So for a given asset it is one regime or the other, and the choice has history attached to it.[4][5]

The window closes after the 2030 year.[5]

That is a modelling exercise on your own numbers, run by our ICPAC-registered accounting partner or a licensed tax advisor. It is not something to decide from a table. Which side of the choice suits your numbers is a calculation for a licensed Cyprus tax advisor, not a rule of thumb.

Whether you can write off the codebase you contributed for shares

Spread over up to twenty years, yes, but capped at documented market value on the day it went in, and refused outright if that value is not documented.

A common founder move is to transfer an existing product into the new Cyprus company in exchange for shares, put a confident valuation on it, and start writing it off.

What the deduction does allow[4]

Capital expenditure on acquiring or developing an intangible asset spread over its lifeOn a reasonable basis in line with accepted accounting principles, up to a maximum of twenty years.
Assets with an indefinite useful economic life spread over twenty years[5]Added by the 2026 reform.

The limit aimed squarely at this move: Capital expenditure on intangibles introduced into a company against an issue of share capital may not exceed the market value of those assets at the date they are introduced into the business, and no deduction is granted at all if that market value is not documented to the Commissioner's satisfaction.[4][5]

"Documented" is doing real work in that sentence. Get the valuation done properly and contemporaneously, or plan on no deduction.

What invoicing clients in three countries actually requires

Place of supply follows the customer if the customer is a relevant taxable person, and you otherwise; only supplies to other member states are listed monthly.

A consultancy billing across borders has to answer a different VAT question per invoice, and the answer rarely depends on where the work was done.

Where a service is supplied, for VAT[7]

Where the customer belongs, when the customer is a relevant taxable person
Where the supplier belongs, otherwise

It runs the other way too, which is the part that catches new companies: Services you buy from abroad, such as the cloud bill, the overseas contractor and the design tool subscription, are treated as though your own company had supplied them to itself in Cyprus, so you declare the VAT and, where you have full recovery, deduct it in the same breath.[8]

Registration for VAT becomes compulsory once taxable transactions over the preceding twelve months exceed €15,600, or will exceed that within the next thirty days. Most consultancies register voluntarily well before that, because business clients expect a VAT number and because input VAT on equipment, software and professional fees becomes recoverable.[13]

What surprises people is the reporting that comes with cross-border business-to-business work.

The recapitulative statement, or VIES list[9]

Filed by anyone who supplied goods or services in a month to a business registered in another member stateIt lists the customers concerned.
Due no later than the fifteenth day after the end of that monthMonthly, not quarterly.
Services count, not only goodsIt expressly covers services on which the customer accounts for the tax, so a consultancy that never touches goods still files it.
A nil statement is generally still dueIf one was due last month and you made no such supplies this month. The trigger is the obligation to file, not whether you filed.

€50for a statement the Commissioner has not received by the deadline

€15for one filed with omissions or inaccuracies and not corrected in time

[10][11]

Small amounts, but they recur monthly and they are entirely avoidable. Our ICPAC-registered accounting partner handles the VAT registration, the returns and these statements; CyPRO One keeps the calendar and chases the inputs.

What hangs on contractor versus employee

Three separate things: who owns the work, whether the R&D deduction is available at all, and what the company owes in contributions.

Agencies scale through contractors because it is fast, and the arrangement has consequences on three separate axes that are worth separating. The Cyprus tax incentives written for this sector do not assume that shape.

The three axes

Ownership[1]A contract for services engages the deemed transfer, so the work goes to whoever commissioned it unless the agreement says otherwise. Paper it anyway, because an agreement you cannot evidence is one you will lose.
Tax[4]The deduction for research and development expenditure is available to a person carrying on a business who has the economic ownership of the intangible asset that arises, or may arise, from the expenditure. That is a paperwork question before it is an accounting one.
ContributionsEngage someone as an employee instead and the company becomes an employer.

The other reason to paper it: Writing is not what makes the deemed transfer work. It is what makes the assignments and exclusive licences a real contractor agreement carries alongside the commissioning language valid.[2]

Where this goes wrong: If the people writing the code retain rights in it because nobody papered the arrangement, the company paying for the work may not have the ownership the deduction is written around. That makes the contracting question a tax question as well as a legal one, and it is the single most common gap we see in files that arrive already half-built.[4]

8.8%of insurable earnings withheld from the employee — Social Insurance Fund

8.8%of insurable earnings paid by the company — Social Insurance Fund

1.2%paid by the company — Redundancy Fund

0.5%paid by the company — Human Resource Development Fund

2%paid by the company — Social Cohesion Fund

2.65%from the employee — General Healthcare System

2.90%from the company — General Healthcare System

[14][15]

Only one of the seven runs on unlimited earnings: Most of them stop at a ceiling, which is why a founder-level salary costs materially less than the headline percentages imply.

Where each ceiling falls in 2026

Both Social Insurance Fund contributions, the Redundancy Fund and the Human Resource Development Fund[16]Capped at a maximum insurable earnings figure revised each year: for 2026, €5,742 a month, so €68,904 a year. Earnings above it attract none of the four.
General Healthcare System[15]A separate ceiling: the employee's 2.65% is charged on income up to €180,000 a year per person, about €4,770 at that rate.
Social Cohesion Fund[17]The exception. The 2% is calculated on the total of the earnings, with no limit or ceiling.

Employer contributions are due by the end of the following calendar month.[14]

The label on the invoice does not decide it: Whether a particular engagement is genuinely self-employment is a determination for the Social Insurance Services rather than a label you choose on the invoice. Confirm it rather than assume it.

This page is for information only

Nothing on this page constitutes legal or tax advice. Tax law is subject to change. The effect of any of it on your circumstances depends on what your client and contractor agreements actually say, where the intellectual property was developed and by whom, and which country each of your customers is established in. Always seek independent professional advice before making residency, structuring, or filing decisions based on this content.

Services referred to on this page are delivered through licensed Cyprus partners — a Cyprus Bar Association registered lawyer, an ICPAC-registered accounting firm, and/or a licensed Cyprus corporate services provider, as applicable. CyPRO One coordinates the engagement and acts as your single point of contact.

Frequently Asked Questions

Who owns the code my Cyprus company writes for a client?

By default, the client. Where creation of a work is undertaken to the order of a person or organisation that is not the author's employer, under a contract for services, the copyright is deemed to have been transferred to the person or organisation that ordered the work, subject to any agreement between the parties excluding or limiting that transfer.[1]

If you intend to keep a reusable framework, a component library or a model, the contract has to say so. The same default works in your favour with your own subcontractors, whose commissioned work transfers to you on exactly the same terms.[1]

The deemed transfer is expressly carved out of the writing rule, the one that invalidates an assignment or an exclusive licence that is not in writing. So an agreement excluding or limiting the transfer bites without being written. Put it in writing anyway, because an agreement you cannot evidence is one you will lose.[1][2]

Our partner law firm advises on the drafting; CyPRO One coordinates the engagement.

Can CyPRO One set up an IP Box structure for my software?

Not directly, no. IP Box structuring is specialist Cyprus tax advice, and CyPRO One is a coordinator and platform rather than a licensed tax practice, so the advice itself comes from a licensed Cyprus tax advisor. What we do is coordinate that engagement.

So the company is formed through our licensed Cyprus corporate services partner, the accounting and audit run through our ICPAC-registered partner, and the intellectual-property question goes to the licensed tax advisor, with us coordinating all three and staying your single point of contact.

For context so you can ask better questions: the deduction is 80% of qualifying profits from a qualifying intangible asset, the remaining 20% is taxed at the 15% corporate rate, and what qualifies is set by Regulations made by the Council of Ministers rather than by the section itself.[4][6]

Do I charge VAT to a client in Germany, in the UK, and in the US?

The place of supply of a service is where the customer belongs when the customer is a relevant taxable person, and where you belong otherwise.[7]

How that lands on three invoices in the same month[7]

A VAT-registered business in GermanyTakes the supply outside Cyprus VAT and accounts for it in Germany.
A private consumer in GermanyDoes not, and the treatment turns on the type of service.
A business customer in the United Kingdom or the United StatesSits outside the EU VAT system, so a Cyprus VAT charge is generally not in point, though their own domestic rules may be.

Verify and keep evidence of a business customer's VAT number rather than taking it on trust.

Remember too that supplies to VAT-registered customers in other member states go on the monthly recapitulative statement. Your ICPAC-registered accounting partner confirms the treatment per contract.[9]

I want to move my existing product into the Cyprus company. What should I watch?

The valuation, and the evidence for it. Capital expenditure on intangibles introduced into a company against an issue of share capital may not exceed their market value at the date of introduction into the business, and no deduction is granted where that market value is not documented to the Commissioner's satisfaction.[4][5]

So the transfer needs a defensible, contemporaneous valuation and a clean written assignment of the underlying rights.

Separately, check the chain of title before you value anything, though not for the reason people usually give. Where contractors built it under a Cyprus-law contract for services, the copyright is already deemed transferred to whoever commissioned the work, expressly notwithstanding the writing rule, so the familiar "nobody signed an assignment" gap does not arise.[1][2]

What does need checking is work commissioned under another country's law, where the default may run the other way, and any third-party or open-source components, whose own licence terms govern regardless of who paid for the integration.

Does a Cyprus company make sense if my clients are all outside the EU?

Sometimes, and the reasons are usually not the tax rate. An EU-registered entity with a VAT number clears procurement obstacles, gives you an EU-law contracting basis and access to euro payment rails, and the corporate rate is 15% from 2026.[6]

But if every client is outside the EU, the cross-border VAT machinery that occupies much of this page, the recapitulative statement and the reverse charge on EU purchases, largely falls away, and what is left is a straightforward company with the ordinary annual obligations.[9][8]

So the decision rests on where the work is genuinely directed from, what your current tax office will say, and whether the compliance load is worth the commercial gain. Those are questions for a licensed Cyprus tax advisor. CyPRO One coordinates formation and compliance; we do not give the tax opinion.

Sources

Every figure and rule on this page traces to one of these. Check them rather than take our word for it.

Written by Renato Giurea, founder of CyPRO One · Updated 5 September 2026

Regulated work described on this page is carried out by licensed Cyprus partners.

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