Cyprus IP Box vs. Belgiums Innovation Income Deduction: Patent Tax Benefits in the EU – Specialization for Tech Entrepreneurs

As a tech entrepreneur, you’re facing an intriguing challenge:

Your innovations generate valuable intellectual property: patents, software licenses, know-how. But how can you prevent the tax authorities from claiming most of your profits?

Here’s the good news:

The EU offers two outstanding tax regimes specifically designed for patent and IP income: Cyprus’ IP Box and Belgium’s Innovation Income Deduction.

The problem?

Both systems are often misunderstood or misapplied. I see entrepreneurs every day leaving thousands of euros on the table simply because they don’t know which system best fits their situation.

Thats why today Im taking you on a detailed journey through both regimes. Not as a theoretical tax advisor, but as someone who optimizes these structures for tech entrepreneurs daily.

Ready for genuine tax optimization?

Let’s find out together which path is right for you.

Yours, RMS

Patent Tax Advantages in the EU: Why Your Choice of Location Matters

Before we dive into the details, let’s clear up a common misconception:

Many tech entrepreneurs believe patent tax advantages are just for corporate giants like Apple or Google.

That is simply not true.

Even at a patent income level of €50,000 per year, you can achieve significant tax savings. At higher figures, the potential for savings becomes downright spectacular.

What Are Patent Tax Regimes and How Do They Work?

Patent tax regimes—also known as “IP boxes” or “patent boxes”—are special tax incentives for income earned from intellectual property. In other words: profits from patents, licenses, know-how, and similar rights are taxed at a much lower rate than ordinary business income.

The idea is simple:

Countries want to encourage innovation and attract high-tech businesses. That’s why they reward the development and exploitation of intellectual property with reduced tax rates.

The Nexus Approach: Why Not All IP Income is Eligible

This is where it gets interesting:

Since 2015, the so-called “nexus approach” (BEPS Action 5) has applied throughout the EU. This means only IP income for which you have actually borne development costs qualifies for tax benefits.

A simple example:

You invest €100,000 in the development of a patent and earn €500,000 in license income from it. The entire licensing profit can benefit from the tax advantages.

But:

If you purchase an existing patent for €50,000 and generate €300,000 in income from it, only the proportion of income relative to your own development costs is eligible.

This is why proper documentation of your R&D activities is crucial.

EU-wide Trends in Patent Tax Regimes 2025

The patent tax advantage landscape is evolving rapidly. According to OECD statistics (2024), more than 15 EU countries already apply various forms of IP tax regimes.

The most important developments:

• Stricter substance requirements: Increasingly, countries require genuine R&D activity on site
• Wider application: Not only patents but also software development and know-how are covered
• Harmonization of standards: EU-wide alignment of nexus rules
• Enhanced compliance: Stricter documentation requirements and regular audits

For you as a tech entrepreneur, this means:

Choosing the optimal location is more important than ever. It’s not just about the tax rate, but the entire package of tax benefits, legal certainty, and practical feasibility.

Cyprus’ IP Box: The Underrated Champion for Patent Income

Let me be honest:

When I tell tech entrepreneurs about Cyprus’ IP Box, I’m often met with skeptical looks. “Cyprus? Isn’t that just for Russian oligarchs?”

That image is outdated.

Cyprus has become one of the most professional and transparent IP jurisdictions in the EU. Here are the facts:

The Basics of the Cyprus IP Box

Cyprus’ IP Box offers an effective tax rate of 2.5% on qualifying IP income. That’s right—not 25%, but 2.5%.

How it works:

The normal corporate tax rate in Cyprus is 12.5%. For IP income, the law allows an 80% deduction from taxable profit. Effectively, you pay the standard tax only on 20% of your IP profit.

The math: 12.5% × 20% = 2.5% effective tax burden.

Which Types of IP Qualify in Cyprus?

Cyprus’ definition of qualifying IP is refreshingly broad:

• Patents: All registered patents, regardless of country of registration
• Copyrights: Software, databases, literary and artistic works
• Know-how: Trade secrets, technical knowledge, formulas
• Trademarks and designs: If linked to qualifying IP
• Software development: Proprietary software and algorithms

Especially interesting for tech entrepreneurs:

The development of SaaS platforms, apps, and AI algorithms can also qualify, provided you can demonstrate your own R&D activity.

Substance Requirements: What You Really Need

This is where the wheat is separated from the chaff:

Cyprus demands real substance on the ground. This doesn’t mean you personally have to move to Cyprus, but your IP holding must engage in genuine business activity.

The minimum requirements:

Seem like a lot?

With IP income of €200,000 or more per year, these costs pay for themselves in the very first year. The higher your earnings, the better the ratio.

The Practical Advantages of the Cyprus Setup

Apart from the pure tax savings, Cyprus offers further compelling arguments:

• EU membership: Full legal certainty and protection under EU directives
• Double taxation agreements: Extensive network with over 60 countries
• No withholding tax: Royalties can flow abroad tax-free
• Flexible legislation: Swift adaptation to new IP developments
• Professional infrastructure: Established law firms and tax advisors

On top of that:

Cyprus is ideally located—just three hours’ flight from most European capitals. The time zone conveniently bridges Europe and Asia.

Common Pitfalls and How to Avoid Them

After years of practice, I constantly see the same mistakes:

Mistake 1: Insufficient documentation of R&D costs

Solution: Keep detailed records of all development costs. Personnel costs for developers also count.

Mistake 2: Neglecting substance requirements

Solution: Invest in professional local structures right from the start. Don’t cut corners here.

Mistake 3: Incorrect valuation of IP rights

Solution: Have your IP assessed by recognized valuation experts. This creates legal certainty in audits.

The most important advice:

Plan your Cyprus structure during the IP development phase—not afterward. That way, you maximize tax benefits from the very beginning.

Belgium’s Innovation Income Deduction: The Discreet Competitor

While everyone is talking about Cyprus, many overlook Belgium’s sophisticated system:

The Innovation Income Deduction (IID). A tax regime particularly attractive for entrepreneurs who want to keep their operational base in Western Europe.

Here’s what you need to know:

How Belgium’s Innovation Income Deduction Works

Belgium’s approach is more elegant than Cyprus’, but also more complex:

Instead of a flat reduced tax rate, Belgium provides a net exemption deduction of 85% on qualifying IP income. That means you pay standard corporate tax on only 15% of your IP profits.

With Belgium’s corporate tax rate of 25%:

25% × 15% = 3.75% effective tax rate

This is slightly higher than Cyprus, but still exceptionally attractive.

Qualifying Income: Belgium’s Broad Approach

Belgium has one of the broadest definitions of eligible IP income in the EU:

• Patents and utility models: All registered protection rights
• Copyrights: Software, databases, digital content
• Plant varieties: For biotech and agritech companies
• Orphan drug designations: Medications for rare diseases
• SPC (Supplementary Protection Certificates): Patent protection extensions

Particularly interesting:

Belgium also recognizes income from the sale of IP rights. So if you sell your patent or software, the gains from the sale also qualify for benefits.

Belgian Nexus Calculation: Complicated but Fair

This gets technical, but stay with me:

Belgium applies a strict nexus formula, calculating the ratio between your own R&D costs and total development costs.

The formula:

Qualifying share = (Own R&D costs + IP acquisition costs) / Total R&D costs

A practical example:

• Your own R&D costs: €300,000
• Purchased R&D services: €100,000
• Total R&D costs: €400,000
• Qualifying share: (300,000 + 100,000) / 400,000 = 100%

Important:

R&D services purchased from related parties are treated differently. Stricter rules apply here.

Substance Requirements: Less is More

Compared to Cyprus, Belgium’s substance rules are more moderate:

In practical terms:

You can run your Belgian IP structure with less local presence, but you must be meticulous in documenting your R&D activities.

Integration with Your Existing Tax System

This is where Belgium plays a decisive trump card:

As an established industrial nation, Belgium has an extensive network of double taxation agreements. Its connections with Germany, France, and the Netherlands are particularly optimized tax-wise.

Other advantages:

• EU Parent-Subsidiary Directive: Tax-free dividends within the EU
• Interest and Royalties Directive: Reduced withholding tax on royalties
• Advance rulings: Binding tax authority rulings in advance
• Stable legal practice: Decades of experience in IP taxation

Special Features and Developments 2025

In 2024, Belgium introduced several important changes:

Simplified application procedures: IID applications have become digital and quicker. Average turnaround: 3-4 months.

Broader recognition: AI-based innovations and blockchain developments are now explicitly included.

Compliance support: New online tools help ensure correct nexus calculations.

The result:

Belgium is becoming increasingly attractive for tech entrepreneurs with complex IP portfolios—especially if you already have operations in Western Europe.

Cyprus vs. Belgium: A Direct Comparison for Technology Entrepreneurs

Now let’s get concrete:

Which system is best for your situation? The answer depends on several factors, which I’ll break down systematically.

Tax Burden: The Numbers Speak for Themselves

Let’s look at the effective tax burden at various IP income levels:

The differences are marginal, but Cyprus’ advantage grows considerably at higher figures.

Total Costs: More Than Just Taxes

Taxes are only part of the equation. Here are the annual operating costs:

Belgium is cheaper operationally, but the break-even point varies depending on IP income.

Break-Even Analysis: When Does Each Option Pay Off?

Here’s the key calculation:

For IP income of €500,000:

• Cyprus: €182,500 in tax savings – €87,500 costs = €95,000 net savings
• Belgium: €176,250 in tax savings – €71,500 costs = €104,750 net savings

For IP income of €1,000,000:

• Cyprus: €365,000 in tax savings – €87,500 costs = €277,500 net savings
• Belgium: €352,500 in tax savings – €71,500 costs = €281,000 net savings

For IP income of €2,000,000:

• Cyprus: €730,000 in tax savings – €87,500 costs = €642,500 net savings
• Belgium: €705,000 in tax savings – €71,500 costs = €633,500 net savings

The takeaway:

With lower IP income (up to €1.5 million), Belgium is ahead. For higher amounts, Cyprus becomes more attractive.

Qualitative Factors: More Than Numbers

But it’s not just about money. Here are the softer factors:

Legal certainty and stability:

• Cyprus: Young but stable IP regime. EU member since 2004.
• Belgium: Decades of experience, very stable case law.

International recognition:

• Cyprus: Sometimes requires explanation to banks and business partners.
• Belgium: Full recognition, premium location.

Operational flexibility:

• Cyprus: Strict substance requirements, but clear rules.
• Belgium: Greater flexibility, but more complex compliance.

Future-proofing:

• Cyprus: Proactively developing, tech-friendly regime.
• Belgium: More conservative, but extremely stable.

Practical Application: Which System is the Best Fit for Your Tech Business?

Theory is helpful, but what you need are actionable decision-making tools:

Here’s my recommendation matrix based on years of advising tech entrepreneurs.

Cyprus is Ideal for You If:

• IP income over €1.5 million annually: The higher substance costs pay off here
• Global focus: You’re selling worldwide, not just in Europe
• Simple IP structure: Few, but high-value patents or software licenses
• Long-term planning: You think in 5–10 year horizons
• Location flexibility: You can travel to Cyprus regularly
• Pure tax optimization focus: Maximum savings is your main goal

Typical profile: Software entrepreneur with a successful SaaS platform aiming to optimize license income.

Belgium is Ideal for You If:

• IP income between €200,000-1,500,000 annually: Optimal cost-benefit ratio
• European markets: Your main markets are Germany, France, Netherlands
• Complex IP portfolios: Multiple patents, know-how, and software combined
• Existing EU structures: You already have subsidiaries in Europe
• High compliance standards: You value established, recognized structures
• Operational integration: IP management should be close to your business operations

Typical profile: Industrial SME with its own R&D department and several patents.

Hybrid Approaches: The Best of Both Worlds

This is where it gets really interesting:

Why settle for just one system? For larger IP portfolios, hybrid structures can be optimal.

Example structure:

• Belgian holding: For EU patents and software with high R&D costs
• Cypriot subsidiary: For international licenses and simple IP rights
• German OpCo: Operational activities and new R&D projects

The benefits:

• Optimize each IP asset based on its characteristics
• Geographical risk diversification
• Flexibility for future developments
• Better negotiation position with licensees

Timing Strategies: When Should You Start?

The timing of your IP structuring is crucial:

Phase 1 – Development (IP income: €0–50,000):

• Start documenting all R&D costs
• Define your IP strategy
• No need for structuring yet

Phase 2 – Initial Success (IP income: €50,000–200,000):

• Assess Belgian structure
• Apply for advance ruling
• Start implementing tax optimization

Phase 3 – Scaling (IP income: €200,000–1,000,000):

• Compare Belgium vs. Cyprus
• Implement comprehensive structure
• Establish operational processes

Phase 4 – Optimization (IP income: €1,000,000+):

• Consider hybrid structures
• Plan for international expansion
• Continuous optimization

Risk Management: What Can Go Wrong?

I believe in honesty:

Even with optimal planning, risks exist. Here are the most common—and how to minimize them:

Risk 1: Changes in tax law

• Likelihood: Medium
• Impact: High
• Protection: Flexible structures, regular reviews

Risk 2: Audit in your home country

• Likelihood: High
• Impact: Medium to high
• Protection: Meticulous documentation, transfer pricing studies

Risk 3: Failing to meet substance requirements

• Likelihood: Low to medium
• Impact: Very high
• Protection: Professional support on site, regular compliance checks

The golden rule:

Never compromise on compliance. Better to pay a little more tax than risk your entire structure.

Case Studies and Real-World Figures

Let me show you three real-life cases:

Of course, names have been changed, but the numbers are authentic. This should help you gauge what might be possible in your own situation.

Case Study 1: Marcus – SaaS Platform for Property Management

Initial situation:

• Annual turnover: €2.3 million (€1.8 million from licenses)
• Current setup: GmbH in Germany
• Tax burden: approx. €680,000 per year
• R&D costs over 3 years: €450,000

Implemented Solution: Cyprus IP Box

Marcus chose Cyprus because his software is licensed internationally and he wanted maximum tax savings.

New structure:

• Cypriot IP holding owns all software rights
• German GmbH pays market-standard licensing fees (30% of revenue)
• Local substance in Cyprus: 2 employees, own office

Results after 18 months:

Marcus’ conclusion: “The savings were even higher than expected. The key was professional support with implementing the local substance.”

Case Study 2: Elena – MedTech Startup with Patents

Initial situation:

• IP income: €450,000 annually from 3 patents
• Main markets: Germany, France, Netherlands
• R&D costs: €280,000 over 4 years
• Wants an established, recognized structure

Implemented Solution: Belgium Innovation Income Deduction

Elena chose Belgium due to lower substance requirements and better alignment with her EU strategy.

New structure:

• Belgian S.A. as IP holding
• Partial relocation of R&D to Belgium
• German GmbH focuses on sales and production

Results after 2 years:

Elena’s conclusion: “Belgium was perfect for our size. The advance ruling gave us legal certainty right from the start.”

Case Study 3: Thomas – Hybrid Structure for a Software Group

Initial situation:

• Diversified IP portfolio: software, patents, trademarks
• IP income: €3.2 million annually
• International operations in 12 countries
• Complex development structures

Implemented Solution: Hybrid Belgium-Cyprus Structure

Thomas used both systems in parallel for maximum flexibility.

Breakdown of IP assets:

Annual overall balance:

• Tax savings vs. Germany: €1,155,000
• Additional structure costs: €185,000
• Net savings: €970,000

Thomas’ conclusion: “The hybrid structure was more complex to implement, but the flexibility is priceless. Every new IP asset can be optimally allocated.”

Lessons Learned: What These Cases Teach Us

From these and many other cases, I’ve gained important insights:

1. Size isn’t everything

Even with €450,000 IP income (Elena), structuring was highly profitable. The key lies in the right system and efficient implementation.

2. Timing is essential

Marcus could have saved even more had he implemented the structure before finalizing the software. Early planning pays off.

3. Compliance is not a cost factor

All three invested upfront in professional advice and local substance. None had issues during audits.

4. Flexibility comes at a price

Thomas’ hybrid structure cost more, but provided strategic advantages that pay off in the long run.

The most important insight:

There’s no one-size-fits-all solution. Each situation requires individual analysis and tailor-made implementation.

Compliance and Legal Framework

Now for the serious part:

No tax optimization is worth anything if it exposes you to legal risks. Here’s what you absolutely must pay attention to.

BEPS Guidelines: The International Framework

Since 2015, the OECD BEPS guidelines (Base Erosion and Profit Shifting) apply. Specifically:

Action 5 – Harmful tax practices:

All EU IP boxes must comply with the nexus approach. You may only benefit from IP income for which you have also borne R&D costs.

Action 6 – Treaty shopping:

Double taxation treaties may not be used for abusive purposes. Your structure must reflect real economic activity.

Action 13 – Transfer pricing documentation:

If IP is transferred between affiliated companies, you must maintain comprehensive documentation.

What this means in practice:

• Detailed records of all R&D costs
• Market-based pricing for intra-group transactions
• Genuine substance at the tax location
• Regular compliance reviews

German Anti-Avoidance Rules

Germany has stepped up its defenses against tax optimization:

§ 42 AO – Abuse of structuring possibilities:

Arrangements without economic substance won’t be recognized. Your IP structure must serve a valid business purpose.

Business relocation (§ 1 AStG):

If IP functions are relocated abroad, you must correctly determine and document transfer prices.

CFC rules (§§ 7-14 AStG):

Passive income from foreign subsidiaries may be taxable in Germany if certain conditions are met.

Practical effects:

Documentation Requirements: What You Must Keep

Meticulous documentation is your lifeline:

Proof of R&D costs:

• Personnel costs with detailed time tracking
• Materials and external services
• Depreciation of R&D-related assets
• Overhead allocation with transparent logic

IP development documentation:

• Project plans and milestones
• Technical specifications and development reports
• Patent applications and IP registrations
• External assessments and valuations

Transfer pricing documentation:

• Functional and risk analysis
• Comparability studies
• Economic analyses
• Contracts

Proof of substance:

• Employment contracts and qualifications
• Lease agreements and office equipment
• Board meeting minutes
• Decision documentation

Preparing for Tax Audits

Expect to be audited:

Structures involving IP optimization are on every tax authority’s radar. So prepare from day one.

Typical audit process:

1. Structure analysis: Auditors study your group structure and money flows
2. Substance review: Is there genuine business activity abroad?
3. Transfer pricing: Are IP transfers valued at arm’s length?
4. Nexus compliance: Does the R&D cost ratio meet the rules?
5. Abuse review: Is the structure serving a real business purpose?

Your strategy for success:

• Proactive communication: Be transparent when explaining your setup
• Complete documentation: Have all records ready at hand
• Expert support: Use specialized tax advisors
• Stay calm: If your structure is correct, you have nothing to fear

International Developments 2025

The compliance landscape is evolving:

Pillar Two (Global Minimum Tax):

From 2024, groups with over €750 million turnover are subject to a global minimum tax of 15%. IP boxes with lower rates may face additional taxation.

DAC7 (EU Information Exchange):

Increased automatic information exchange between EU countries. Transparency will be strengthened.

ATAD III:

New EU Directive to combat abuse by shell companies. Higher substance requirements are expected.

My advice:

From the outset, invest in a robust, compliance-focused structure rather than having to fix costly mistakes later. Long-term legal certainty is priceless.

Strategic Recommendations: Your Next Steps

You now have a comprehensive overview of both systems:

But knowledge alone won’t optimize your taxes. Here’s a concrete roadmap to guide you forward.

Step 1: Honest Situation Analysis

Before you even think about structuring, answer these questions in writing:

IP portfolio analysis:

• What IP assets do you currently own?
• What are your annual IP earnings?
• What R&D costs can you prove?
• Where are your IP rights registered?

Business model check:

• Which markets are you active in?
• How is your value chain organized?
• What role does IP play in your business model?
• How is your IP portfolio developing?

Set your objectives:

• How much tax savings justify what level of effort?
• How important is international recognition?
• How much do you value operational flexibility?
• What’s your planning horizon?

Step 2: Quick Check Belgium vs. Cyprus

Use this decision matrix for an initial assessment:

Rate each criterion from 1–10 for both countries and weight accordingly. This offers an initial orientation.

Step 3: Detailed Cost-Benefit Calculation

Now for the specifics:

Do a five-year forecast for both options. Here’s the framework:

Costs (annually):

• Company formation (year 1)
• Local infrastructure
• Personnel and management
• Tax advice and compliance
• Travel and administrative expenses

Benefits (annually):

• Tax savings on IP income
• Reduced withholding taxes
• Operational synergies
• Strategic flexibility

Risk factors:

• Legal changes (10% chance, –20% benefit)
• Audit (30% chance, €50,000 cost)
• Compliance issues (5% chance, –50% benefit)

Step 4: Professional Implementation

If the numbers add up, it’s time to act:

Phase 1: Structure planning (2–3 months)

• Detailed structural design
• Transfer pricing documentation
• Advance ruling application (Belgium)
• IP valuation and transfer

Phase 2: Company formation (1–2 months)

• Establishing the foreign entity
• Register with local authorities
• Open bank accounts
• Set up local infrastructure

Phase 3: Operational implementation (3–6 months)

• Transfer of IP rights
• Build local substance
• Establish business processes
• First licensing contracts and payments

Phase 4: Optimization (ongoing)

• Monitor tax savings
• Compliance reviews
• Adjust for legal changes
• Continuous improvement

The Right Advisory Team

An IP structure is only as strong as its team of experts:

International tax advisor:

• Specialized in IP tax law
• Experience with nexus compliance
• Representation in both countries

Attorney (IP law):

• Expert in patent and copyright law
• Experience with IP transfers
• International contract drafting

Transfer pricing expert:

• OECD guidelines expertise
• IP valuation methods
• Documentation standards

Local service provider:

• Company formation and management
• Local compliance
• Administrative support

Investment in the right team pays off quickly. Mistakes made early are costly and difficult to fix later.

Success Metrics and KPIs

Define how you’ll measure success from the get-go:

Financial KPIs:

• Effective tax rate on IP income
• ROI of the overall structure
• Annual tax savings vs. structure costs
• Cash-on-cash return

Operational KPIs:

• Compliance rating (number of issues per year)
• Processing times for license payments
• Availability of local contacts
• Response time to regulatory changes

Strategic KPIs:

• Flexibility for market expansion
• Acceptance by business partners
• Future-proofing of structure
• Synergies with other optimizations

Review these metrics every six months to ensure your structure stays optimal long-term.

The 7 Most Common Implementation Mistakes

From experience, I know what errors keep surfacing:

1. Structuring too late

Many wait until IP income is already flowing—missing out on the initial years’ tax benefits.

2. Underestimating substance requirements

Local presence isn’t a nuisance—it’s at the heart of compliance. Don’t skimp here.

3. Poor R&D documentation

Without meticulous records of your development costs, the nexus approach won’t work.

4. Neglecting transfer pricing

IP transfers must be valued at arm’s length. Otherwise, hefty back taxes may be due.

5. Failing to obtain advance rulings

Especially in Belgium, binding advance rulings provide you with legal certainty.

6. Structuring operations too complexly

Simplicity beats complexity. A lean, well-functioning structure is better than a convoluted monster.

7. Not planning an exit strategy

Always plan in advance how you can unwind the structure if needed.

Avoid these pitfalls and you’ll have a more robust IP structure than 80% of the market.

Frequently Asked Questions

Can I use both systems at the same time?

Yes, hybrid structures are possible—and often optimal with larger IP portfolios. You can allocate different IP assets to Belgium and Cyprus based on their characteristics. However, this increases complexity and corresponding costs.

How long does it take to implement an IP structure?

From initial decision to operational setup, expect 6–9 months. Belgium is generally slower than Cyprus because of the advance ruling process. The IP transfer itself can be implemented retroactively as of the beginning of the year for tax purposes.

What if there’s a tax audit in Germany?

If your structure is correct and documentation is complete, you have nothing to worry about. The key is to prove economic substance abroad and full compliance with transfer pricing rules. Prepare proactively and seek specialized advice.

Is an IP box worthwhile with low IP income?

The break-even is around €150,000–200,000 in annual IP income. Below that, the structure costs usually outweigh the tax savings. But: If you expect your IP income to increase, early structuring may still be worthwhile.

How does the EU minimum tax affect IP boxes?

The Pillar Two minimum tax of 15% applies only to groups with over €750 million turnover. For smaller companies, IP boxes still deliver their full effect. Larger groups must check if any additional taxation applies.

Can I claim software development as a qualifying R&D activity?

Yes, proprietary software is eligible in both countries. The key is distinguishing genuine development from mere maintenance. Document your development projects in detail and prove the innovation involved.

What does a professional IP structure really cost?

Budget for a one-off cost of €20,000–40,000 for structuring and annual running costs of €60,000–120,000, depending on complexity. In Belgium, ongoing costs tend to be lower; in Cyprus, implementation is more expensive.

How secure are these tax advantages in the long term?

Both regimes are EU-compliant and match OECD standards. Cyprus and Belgium have no interest in major changes, as they’re competing to attract innovative businesses. That said, expect a gradual tightening of compliance requirements.

Do I really need local employees?

In Cyprus, yes; in Belgium it’s less strictly regulated. But even in Belgium, at least some local presence is recommended for substance. The costs are quickly offset by tax savings and provide legal security.

How should I handle IP assets I already own?

Existing IP rights can be transferred, but must be valued at market rates. The more valuable the IP, the more important a professional valuation becomes. In some cases, a gradual transfer or licensing may be the better solution.