Cyprus

Cyprus is expanding and updating its double tax treaty (DTT) network. A first-time Cyprus-Netherlands DTT entered into force as of 30 June 2023 and is effective as of 1 January 2024. A first-time Cyprus-Croatia DTT was signed and entered into force in 2023 and became effective as of 1 January 2024. A revised Cyprus-France DTT was signed on 11 December 2023 and is now awaiting ratification before it becomes effective.

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 (MLI) to Prevent Base Erosion and Profit Shifting (BEPS) on 7 June 2017.  Subsequently, Cyprus ratified the MLI on 23 January 2020. The date of 'entry into effect' as regards Cyprus’ application of the MLI for any particular bilateral DTT covered by the MLI depends upon various possible legal processes/options by the other contracting jurisdiction. 

Cyprus has also successfully transposed into its legal and tax framework all European Union (EU) Directives on Administrative Cooperation and Mutual Assistance (DACs 1-5). Furthermore, on 30 March 2021, the law transposing the DAC6 Directive entered into force with retroactive effect covering transactions from 25 June 2018 and onwards.

With effect as of 1 January 2022, transfer pricing documentation requirements have been introduced. The transfer pricing documentation compliance obligations include the preparation of Master File, Cyprus Local File, Summary Table, and Minimum Transfer Pricing Documentation for Cyprus tax resident persons and permanent establishments (PEs) of non-Cyprus tax resident persons situated in Cyprus that engage in transactions with related parties.

As of 31 December 2022, Cyprus applies withholding tax (WHT) on certain payments to companies in jurisdictions included on the EU list of non-cooperative jurisdictions on tax matters (commonly referred to as the EU ‘blacklist’) as follows:

• WHT of 17% applies on payments of dividends by non-quoted companies.
• WHT of 17% (30% during 31 December 2022 - 31 December 2023) applies on payments of interest (excluding payments by individuals).
• WHT of 10% applies on payments of royalties and similar types of payments (excluding payments by individuals).

The application of tax incentives relating to investments in innovative small and medium-sized enterprises (SMEs) has been extended to 31 December 2026.

Also, Cyprus, as an EU member state, has transposed the EU Directive on global minimum tax for multinational enterprise groups and large-scale domestic groups into its national law, with effect from 1 January 2024. However, Cyprus will not be introducing a domestic minimum tax regime of its own until 1 January 2025.

Finally, with effect as of 1 January 2023, a new deduction and increased wear and tear rates for capital expenses on certain environment-friendly assets were introduced. These new provisions are applicable for tax years 2023-2026.