Cyprus Intellectual Property Capital Allowances 2026

Capital Allowances for Intellectual Property

The tax reform introduces clarification on the calculation of capital allowances for intangible assets, including intellectual property, when such assets are contributed to a company in exchange for shares.

Where an intangible asset is introduced into a company against the issue of share capital, the capital expenditure recognised for tax depreciation purposes cannot exceed the fair market value of the asset at the date it is contributed to the company.

This rule prevents the recognition of inflated acquisition values in circumstances where intellectual property is transferred to a company through a share‑for‑asset transaction.

Documentation of Market Value

The legislation further provides that no capital allowance deduction will be granted where the market value of the asset is not sufficiently substantiated, subject to the assessment of the Commissioner of Taxation.

Accordingly, taxpayers introducing intellectual property or other intangible assets into a Cyprus company should ensure that the fair market value of the asset is properly documented, typically through independent valuation or supporting economic analysis.

Commentary

The clarification addresses practical issues that arose in the application of the Cyprus capital allowance rules for intellectual property. By linking the allowable capital expenditure to the fair market value at the time of contribution, the rule establishes a clearer framework for determining the tax base of intangible assets introduced into Cyprus companies through share issuances.

The amendment therefore reinforces the integrity of the capital allowance system while preserving the availability of tax depreciation for properly valued intellectual property assets.