In line with global efforts to ensure fair taxation, Cyprus has introduced a new tax framework targeting large multinational and domestic groups. This initiative aligns with the OECD’s Pillar Two rules, establishing a global minimum corporate tax rate of 15% for multinational enterprises (MNEs) with annual revenues exceeding €750 million.
Key Components of the New Tax Framework:
Income Inclusion Rule (IIR): Effective for accounting periods beginning on or after December 31, 2023, the IIR mandates that parent entities pay a top-up tax if their subsidiaries are taxed below the 15% minimum rate.
Undertaxed Profits Rule (UTPR): Serving as a safeguard to the IIR, the UTPR will be implemented for accounting periods starting on or after December 31, 2024. It ensures that profits not adequately taxed under the IIR are subject to taxation in other jurisdictions where the MNE operates.
Qualified Domestic Minimum Top-Up Tax (QDMTT): To retain tax revenues within Cyprus, the QDMTT will be effective from January 1, 2025. This measure allows Cyprus to collect the top-up tax domestically, preventing foreign jurisdictions from taxing these profits.
Implications for Affected Groups:
Entities falling within the scope of these rules should:
Assess Impact: Evaluate how the new regulations affect their tax obligations and overall financial strategies.
Enhance Compliance: Ensure that internal systems and processes are updated to meet the new reporting and documentation requirements.
Seek Professional Advice: Consult with tax professionals to navigate the complexities of the new tax landscape effectively.
These measures underscore Cyprus’s commitment to international tax standards, promoting transparency and fairness in the global tax environment. Businesses operating within or through Cyprus should stay informed and prepared for these changes to ensure compliance and optimize their tax positions.
If you need assistance to complying with such requirements do not hesitate to contact us at contact@asterisk.cy .
The above is for informational purposes only and does not constitute any form of advise. If you need advise contact us or your professional tax advisor.
