What is the nexus fraction?
The nexus fraction is the share of your IP profit that qualifies for the 80% deduction. The Cyprus IP Box adopts the OECD nexus approach: the more R&D you do yourself, the bigger your benefit.
Cybooks calculates the nexus fraction cumulatively, from the asset’s inception date to the end of the reporting period.
The formula
Nexus Fraction (NF) = (QE + UE) / OE, capped at 1.0
Element | What it includes |
QE – Qualifying Expenditure | R&D incurred internally + outsourced to non-related parties. |
OE – Overall Expenditure | QE + related-party R&D + unclassified vendors + IP acquisition costs. |
UE – Uplift Expenditure (30% bonus) | Min(30% × QE, related + unclassified + acquisition). |
The 30% uplift – explained simply
The uplift gives you a small bonus for any related-party or acquired R&D. It’s capped at 30% of your own QE – so it never lets you reach a 100% ratio just by buying or outsourcing IP.
Example: QE €100,000, related-party costs €50,000, no acquisition.
30% × QE = €30,000
Pool (related + acquisition) = €50,000
UE = min(30,000, 50,000) = €30,000
OE = 100,000 + 50,000 = €150,000
Nexus = (100,000 + 30,000) / 150,000 = 86.7%
What improves your ratio
Do more R&D in-house – classified as Incurred Internally.
Use independent contractors rather than group companies for development work.
Classify all your vendors – unclassified vendors fall into OE without contributing to QE.
What lowers your ratio
Buying existing IP – counted as IP Acquisition in OE.
Outsourcing to related parties, same-UBO companies, or subsidiaries.
Leaving vendors unclassified.
Where to see it in Cybooks
Open any IP asset and switch to the R&D Ratio tab. You’ll see:
Your current ratio with the QE/OE breakdown
The uplift bonus and its cap
Suggestions to improve the ratio
The company-level IP Box overview shows the combined ratio across all assets.