Cyprus Introduces Global Minimum Tax for Multinational Enterprises

On December 12, 2024, the Cyprus House of Representatives agreed to transpose Council Directive (EU) 2022/2523 into national legislation to ensure a global minimum level of taxation for multinational enterprise (MNE) groups and large domestic groups (LDGs) in the European Union. The corresponding text was published in the Gazette and entered into force on December 18.

This document, titled “Ensuring a Global Minimum Level of Taxation of Multinational Enterprise Groups and Large-Scale Domestic Groups in the Union Law of 2023’”, follows Pillar Two of the above-mentioned Directive, which introduces a 15% minimum effective tax rate for ΜΝΕ groups and large-scale domestic groups with consolidated annual revenues exceeding EUR 750 million.

The Law introduces an Income Inclusion Rule (IIR) for financial years starting from December 31, 2023. It requires a parent entity of an MNE group or a large-scale domestic group to pay a top-up tax on its low-taxed income and the low-taxed income of its subsidiaries to ensure that the group’s overall income is taxed at a minimum rate of 15%.

The Law also introduces obligatory Domestic Minimum Top-up Tax (DMTT) and an Undertaxed Profits Rule (UTPR) for financial years starting from December 31, 2024. The DMTT provides for the imposition of top-up tax on the low-tax income of entities and joint ventures of an MNE group or LDG located in Cyprus.  The UTPR applies to MNE groups that have low-tax income in jurisdictions where a top-up tax has not been collected through a Qualified IIR.

The Law provides for the application of OECD Safe Harbours (specific jurisdictions with low-taxed profit risks).

Cypriot entities and joint ventures of covered groups must submit their tax reporting to the national tax authorities no later than 15 months after the end of the relevant financial year (or 18 months in case of the first year of application).

Text of the Law