COLLECTION OF €50 million FROM THE INADEQUATE LAW FOR MULTINATIONAL GROUPS IN CYPRUS - NOVEMBER THE DISCUSSION OF THE NEW TAX - Filenews 28/10 by Eleftheria Paizanou
The Commission may have asked the Republic of Cyprus to make amends - by passing a new law - for the truncated adoption of the European Directive concerning the imposition of a minimum level of taxation of 15% on multinational groups (Pillar 2), but €50 million flowed into the state coffers. through this legislative regulation.
For the tax years 2024 and 2025, the inadequate, for Brussels, law on the taxation of multinationals applies, which, according to the European Commission, favours the parent companies of multinational US interests operating in Cyprus, in violation of EU law.
European legislation provides for the imposition of a minimum level of taxation of 15% on groups of multinationals with annual revenues of more than €750 million. Instead of this arrangement, with the legislation adopted by the Cypriot Parliament in December 2024, another subordinate tax arrangement was introduced, called the "domestic supplementary tax". Due to this decision of the Parliament, which was put into force by the Government, Cyprus is at risk of referral to the Court of Justice of the EU and financial sanctions.
To avoid the possibility of Cyprus getting into legal adventures, the legislation will be changed before the end of the year, according to a decision of the Government, which submitted a bill to the Parliament.
From 30 groups, €50 million.
According to information from "F", the amount of €50 million. that ended up in the state treasury from the law of 2024 concerns the tax year 2024. A competent source told "F" that the €50 million. are additional receipts from the imposition of this tax.
In short, the amount came from the imposition of the minimum tax on 30 groups of companies operating in Cyprus. A similar amount is estimated to be collected for the tax year 2025, while for 2026 the amount will be different, as the legal framework will be amended soon.
However, the Tax Department, in yesterday's announcement, states that, by decision of the Tax Commissioner, November 30, 2026 has been set as the last date for the submission of declarations, notifications and notifications, as well as for the payment of the additional tax due.
At the same time, it is noted that, in the event that the specific declarations, notifications or notifications must be submitted before November 30 or the additional tax due must be paid before the specific date, no administrative fines, interest or charges provided for by law will be imposed, if the submission or payment, as the case may be, is made by November 30.
Soon the bill
In November, the bill that amends the current legal framework and provides that, from the financial year 2026, the appropriate Qualified Domestic Top-up Tax (QDMTT), i.e. the minimum taxation of 15% without any exception in a multinational, will be fully applied to the members of the parliamentary Finance Committee.
Through this regulation, according to estimates by the Ministry of Finance, the recognition of the Cypriot tax regime will be ensured, while at the same time there will be effective protection of the tax revenues of the Republic.
Reactions and concern
It is worth noting that there are reactions to the amendment of the legislation, as some multinational companies of American interests warn that they will withdraw from Cyprus. Something that the Minister of Finance, Makis Keravnos, has rejected as a risk.
Last month, in an intervention, the Cyprus-American Chamber of Commerce warned that some US-based multinational groups may reconsider future expansion plans, choose other jurisdictions for new investments or even decide not to establish operations in Cyprus if the country's competitive position is assessed to be weakened relative to other international business centers.
In fact, the Chamber also cited data, according to which the stock of American foreign direct investment in Cyprus amounts to about $14.9 billion, while American companies in Cyprus contribute tax revenues of €140 million every year.
Warnings and Dangers
The European Commission has sent an ultimatum to the Cypriot authorities, warning that sanctions will be imposed if there is no compliance with European law. At the same time, he had stated that, in the event that Cyprus does not fully comply with the European Directive, there is a possibility that the Cypriot status will not be recognized by the OECD and third jurisdictions, with the risk of double taxation being imposed on the affected groups.
It should be noted that in the economic impact analysis, which was prepared by the competent ministry and which accompanies the bill pending in Parliament, it is stated that there is still no exact picture of the number of affected entities and the expected revenues.
However, in 2024, when the original bill was being discussed in Parliament, it was said that around 1,900 businesses would be affected by the imposition of a minimum corporate tax of 15% on multinationals. There were also estimates of an increase in state receipts by €200 million up to €250 million per year.
