17/12/2024
On 12 December 2024, the Cyprus Parliament enacted the EU Directive known as Pillar Two, establishing a 15% global minimum tax rate. This applies specifically to multinational enterprise (MNE) groups and large domestic groups within the EU that have annual consolidated revenues exceeding €750 million.
The legislation introduces several measures, including the Income Inclusion Rule (IIR) for financial years beginning on or after 31 December 2023. It also implements a Domestic Minimum Top-Up Tax (DMTT) and an Undertaxed Profit Rule (UTPR) for financial years starting on or after 31 December 2024.
In practical terms, large business groups in Cyprus subject to this law and paying an effective tax rate below 15% will need to pay a supplementary tax to make up the difference.
It is important to note that, most EU member states have also adopted this minimum tax level and those that have not, are expected to do so soon.
The enactment of this law aligns Cyprus with EU regulations. However, its impact requires careful evaluation, as any potential increase in state revenues could be offset by the risk of MNE groups relocating to other jurisdictions. It remains to be seen whether Cyprus will introduce measures to mitigate this risk and retain affected business groups.
PGE&Co remains at your disposal for any clarifications and for further assistance that might be needed on this or on any other matter.