Why vendor classification matters
The Cyprus IP Box uses the OECD nexus approach: only R&D done in-house or with independent contractors counts as Qualifying Expenditure (QE). R&D outsourced to companies in your group does not count as QE – it’s included in Overall Expenditure (OE), which lowers your ratio.
Cybooks decides whether each vendor’s costs are QE or non-QE based on the vendor’s R&D Cost Category. If a vendor isn’t classified, their costs are treated as unclassified – non-qualifying – which lowers your ratio.
The five R&D sourcing categories
Category | Counts as | Use for |
Incurred Internally | QE | Your own employees – salary cost vendors, payroll providers feeding the cost. |
Outsourced to Non-Related Parties | QE | Independent freelancers and external agencies (no common ownership). |
Outsourced to Related Parties | OE only | Group companies you don’t fully own – sister companies, joint ventures. |
Outsourced – Same UBOs | OE only | Companies sharing the same ultimate beneficial owners as yours. |
Outsourced to Subsidiary | OE only | Companies you own (directly or indirectly) – e.g. a development subsidiary abroad. |
Rule of thumb: if there’s any common ownership between your company and the vendor, it’s related – not QE.
Classify a single vendor
Open the vendor in Purchases → Vendors.
Set IP Box: R&D Cost Category to the right value.
Save.
Bulk-classify your vendors
From the IP Box module you can classify many vendors at once:
Open IP Box → Settings → Manage vendor classifications, or click Classify now on the unclassified-vendor warning shown on the IP Box overview.
For each vendor with IP-categorized costs, choose the R&D Cost Category from the dropdown.
Click Save.
Only vendors that have at least one bill or expense tagged with an IP Box cost category appear in this list.
Unclassified-vendor alert
When unclassified vendors exist, a yellow warning bar appears on the IP Box overview: “X vendors need R&D classification”. Click Classify now to jump straight to the bulk-classify screen. Resolving this is the single most impactful step you can take to improve your ratio.