Cyprus has officially adopted the Pillar Two global minimum tax framework, aligning with international tax standards to ensure fair taxation and combat tax avoidance. The new law, published in the Official Government Gazette on December 18, 2024, will impact multinational and large-scale domestic groups operating in Cyprus.
Key Changes & Compliance Requirements
New Minimum Tax Rules
- Qualified Income Inclusion Rule (QIIR): From December 31, 2023, local parent companies must ensure their profits—and those of their subsidiaries—are taxed at a minimum effective rate of 15%.
- Qualified Undertaxed Profits Rule (QUTPR): Effective December 31, 2024, this rule applies additional taxation when profits are not sufficiently taxed under the QIIR.
- Domestic Minimum Top-Up Tax (DMTT): Ensures all Cyprus-based entities comply with the 15% minimum tax requirement, preventing tax avoidance.
Compliance & Administration
- Companies must notify the Cyprus Tax Authorities within 15 months after the fiscal year-end (18 months for the transition year).
- A self-assessment filing and any tax payments must be submitted within 30 days of the GloBE return deadline.
- A grace period applies for fiscal years before December 31, 2026, allowing companies time to adjust without penalties.
Next Steps for Multinational Companies
✔ Assess applicability – Determine whether your group falls within the scope of the new law.
✔ Conduct Safe Harbor testing – Review country-by-country reporting to identify potential risks.
✔ Perform impact assessments – Calculate potential top-up taxes and compliance costs.
✔ Evaluate substance-based exclusions – Identify possible reductions based on tangible assets and payroll.
The adoption of Pillar Two strengthens Cyprus’s position as a transparent and compliant jurisdiction. Businesses must act now to ensure compliance and mitigate financial risks.
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