Filenews 9 November 2024 - by Eleftheria Paizanou
Finding a formula to minimize the impact of the approximately 1,900 multinational companies in Cyprus with an annual turnover of over €750 million. The imposition of the 15% global tax is demanded by the affected professional bodies of the private sector.
However, before the parliamentary Committee on Finance, which examined this complex bill yesterday, they said that with the formula the Republic should comply with the European Directive adopted in December 2022, on ensuring a global minimum level of taxation of groups of multinational enterprises and domestic large-scale groups in the Union, also known as "Pillar 2". which forms part of the two pillars within the OECD.
In addition, affected bodies demand that the regulation prevent any US retaliation, as there are relevant threats of blacklisting. This is because the US, India, China and other countries have signalled that they will not apply this tax.
However, at European level, apart from Cyprus, Poland and Spain have not transposed the European Directive. In fact, it was said that Poland is already preparing a parallel legislation with the European Directive, which will give tax deductions, to reduce the economic impact on businesses.
And all this, while the Legal Service warned that a case against the Republic may be officially registered in the Court of Justice of the European Union in a month.
Incentives, lawyers say
On behalf of the Cyprus Bar Association, Maria Gregoriou said that some member states are considering giving back the tax, in her expression, to reduce the impact on companies.
As he explained, in parallel with the article-by-article discussion in Parliament, a dialogue should begin at the Ministry of Finance on taking additional measures in the existing tax framework of Cyprus, in order to reduce the impact. "The bottom line is that there is a global tax of 15%, which does not affect all countries," he said.
'300 companies at risk of leaving'
Angelos Grigoriades, on behalf of Teck Island, speaking in Parliament, said that there are 300 technology companies in Cyprus, warning that there is a risk that they will leave the country. He noted that if 70% of countries do not implement the legislation, there is a risk that companies that are taxed with low taxes will leave Cyprus and move to other countries.
Mr. Grigoriadis said that American companies will not come to Cyprus if the corporate tax is increased to 15%. "There is a possibility that we could be blacklisted in the United States if taxation is implemented. There is a threat not to run to vote for it," he said. At the same time, he said, democracy should have direct contacts with the EU to protect the technology sectors. "To get an exemption for the technology sector, maybe that will save time, even though the country may be fined," he concluded.
Finance Minister: Tragic problems
The Ministry of Finance responded immediately, with its spokeswoman stressing that if legislation is adopted that will not be harmonizingly compatible with the Directive, then the problem will be tragic.
As he said, there will be double taxation of a multinational group, both in Cyprus and in the jurisdiction that will impose the 15% corporate tax. In this way, he said, no company will stay in Cyprus.
He stressed that to date, 55 countries worldwide have complied with this tax, pointing out that lately there has been a gradual increase in countries applying these rules.
The U.S. is another...
The Director General of the Chamber of Shipping, Thomas Kazakos, noted that in the last 24 hours there have been changes in the US after the elections, reiterating that the US Congress sent a letter to the OECD that it will not implement taxation. A spokesperson for ICPAC stressed the need to take compensatory measures to prevent companies from leaving.
In her intervention, a spokeswoman for the Legal Service said that the US is in a favorable position because it is not a member of the EU, unlike Cyprus.
Regarding incentives or compensatory measures, he noted that the Ministry of Finance will examine whether they are allowed by the European directive, provided that they do not constitute state aid. It should be noted that the ministry proceeded with a revision of the bill, which was already complicated and was submitted to Parliament after the Commission referred the Republic to the Court of Justice of the EU. The delay in the submission of the bill and the tight timetables with which the Parliament is called upon to make its decision caused a strong reaction from MPs.