investmentGATEWAY

The necessary amendments to the domestic law of Cyprus are expected to be made in line with the draft EU directive amending EU directive 2011/16/EU on administration cooperation in the field of taxation, as announced by the Minister of Finance on 27 April 2016. The amendments are expected to be in line with the recommendations of Action 13 of the OECD Reports on Base Erosion and Profit Shifting (‘BEPS’).

The Ministry of Finance also announced its support to the provisions of Action 13 with reference to the automatic exchange of Country-by-Country reports; stating that all necessary procedures will be followed, ensuring adoption of relevant provisions in national tax legislation.

In order to stay in line with the draft directive, member states are required to make the necessary amendments to domestic legislation by the end of 2016, and apply the revised provisions by the commencement of 2017.

Once such provisions have been implemented any parent company of a multinational group, with a turnover of over €750 million, will have to adhere to country-by-country reporting, providing income, taxes, and business activities by tax jurisdiction and the information will be submitted to the jurisdiction that the parent company is resident for tax purposes. This information will be exchanged in 2017, based on the information gathered in the 2016 year, Cyprus joining other early adopters committed to implementing CRS.

In the case where country-by-country reporting has not been introduced in the country where the parent company is tax resident, the report may be submitted by a group of companies in the residence jurisdiction “constituent entity” or by a group of companies that has been appointed by the parent company specifically for this purpose “surrogate parent entity” in the jurisdiction of its residence.

The country-by-country report shall be exchanged within 15 months from the end of the financial tax year to which it relates. Initially the reporting of the First directive will allow for the exchange of reporting within 18 months from the end of the tax year to which it relates.

Cyprus is one of 55 jurisdictions that have committed to CRS in 2017 as early adoption countries, along with Seychelles BVI, Luxemburg and United Kingdom.