Cyprus

Corporate - Significant developments

Last reviewed - 05 February 2020

Cyprus is expanding and updating its double tax treaty (DTT) network. New/amended DTTs with Luxembourg, Mauritius, San Marino, and the United Kingdom (UK) entered into force in 2018 and are effective for Cyprus as of 1 January 2019. Also, new DTTs with Andorra and Saudi Arabia and an amending protocol with Ukraine entered into force in 2019 and will be effective for Cyprus as of 1 January 2020. Finally, new/amended DTTs with Kazakhstan and Egypt have been signed and are awaiting entry into force. The DTT with Kazakhstan has been ratified by both parties and will enter into force upon exchange of ratification notes by both parties.

On 5 April 2019, Cyprus voted the first implementation law of the European Union (EU) Anti-Tax-Avoidance Directive (ATAD) and, more specifically, the interest limitation rule, controlled foreign company (CFC) rule, and general anti-abuse rule (GAAR), which are effective for tax years starting from 1 January 2019 (see the Deductions and Group taxation sections for more information).

The first ATAD implementation law impacts only Cyprus corporate income taxpayers and, more specifically, Cyprus tax resident companies and Cyprus permanent establishments (PEs) of non-Cyprus tax resident companies.

The remaining measures provided for in the ATAD are expected to be implemented in Cyprus in a second implementation law (expected to be passed in 2020) and should provide that these measures will be effective as follows:

  • Exit taxation provisions: as from 1 January 2020.
  • Hybrid mismatch rules: as from 1 January 2020 (an exception is certain reverse-hybrid mismatch provisions: expected to be effective as from 1 January 2022).

Cyprus is an early adopter of the Common Reporting Standard (CRS) on automatic exchange of financial account information and also has signed an intergovernmental agreement (IGA) with the United States (US) for the Financial Account Tax Compliance Act (FATCA) (see the Other issues section for more information).

Cyprus signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (BEPS) on 7 June 2017. This is now pending ratification which is expected in 2020.

Over the last 3 years, Cyprus has also successfully transposed into its legal and tax framework all EU Directives on Administrative Cooperation and Mutual Assistance (DACs 1-5).

Further, Cyprus is currently in process of implementing the DAC amendment known as DAC6 (implementation expected in 2020), which provides for mandatory automatic exchange of information in relation to reportable cross-border arrangements (RCBAs), pursuant to Directive 2011/16/EU. As a transitional measure, where the first step in a RCBA is implemented between 25 June 2018 and 30 June 2020, the arrangement should be reported between 1 July 2020 and 31 August 2020.