Cyprus R&D Planning: Separate Costs, Assets and Grant Funding

Start with the asset, not a combined saving

Article 9(1)(d) provides an additional 20% deduction for qualifying scientific research and R&D expenditure incurred in 2025–2030. It excludes expenditure concerning a qualifying intangible asset for which the IP Box under Article 9(1)(k) has applied in any year, including the current year.

There is no universal combined subsidy percentage. Tax deductions and grants measure different things and may have restrictions on eligible costs or cumulative funding.

Build an asset register

1. 1Identify each existing or prospective intangible asset and its economic owner.
2. 2Connect each research project and supplier contract to that asset.
3. 3Split ordinary revenue expenditure, capitalised development and plant or building expenditure.
4. 4Record whether IP Box has ever applied to the asset.
5. 5Reconcile the ledger to the accounts and the proposed tax computation.

Keep grant funding separate

For every funded project, retain the award agreement, eligible-cost schedule, funding percentage and restrictions on other support. Reconcile the funded costs to the same ledger used for tax analysis.

Do not assume a grant leaves the tax deduction base unchanged. The award terms, accounting treatment and applicable tax rules must be reviewed together.

Model alternative treatments

Compare only treatments the asset can legally use. A 20% additional deduction applied to €1 million of qualifying expenditure gives a €200,000 additional deduction; at a 15% tax rate that is a €30,000 current tax reduction where sufficient taxable profit exists.

An IP Box computation instead requires qualifying income, costs and an evidenced nexus fraction. Do not combine these calculations for the same asset in breach of the statutory restriction.

Review before filing

• Confirm eligibility and the applicable expenditure year.
• Reconcile economic ownership and related-party arrangements.
• Check earlier IP Box claims and capital deduction schedules.
• Document grants and any restrictions on cumulative support.
• Have the final tax calculation reviewed against the current law.

Primary source

The controlling tax provisions are in Income Tax Law 118(I)/2002, Article 9. The companion R&D deduction guide explains the statutory calculation; this page focuses on records and workflow.

Official verification starting points

Cyprus Tax Department documents and Cyprus Tax Reform 2026 material publish the controlling material for this topic. Check the current law, form, circular or portal instructions before acting; this article is general information and the live official material prevails.

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Disclaimer: This article is for informational purposes only and does not constitute legal, tax, or financial advice. Tax laws change frequently. Consult a qualified Cyprus adviser for guidance specific to your situation. The information on this page is general guidance only and does not constitute legal, tax, accounting, immigration or financial advice. Specific advice should be obtained based on the facts of each case.