On 26 May 2017 the Ministry issued a revised decree on Country-by-Country (CbC) Reporting, under the powers conferred by Section 6(16) of the Assessment and Collection of Taxes Law.
The obligation of a Cyprus tax resident Constituent Entity of a Multinational Enterprise (MNE) Group, which is not the Ultimate Parent Entity (UPE) or the Surrogate Parent Entity (SPE), to file locally a CbC Report under the secondary mechanism, will not apply for fiscal years commencing before 1 January 2017. Therefore, a Cyprus tax resident Constituent Entity subject to CbC as per the above, will be obliged to start reporting for fiscal years commencing on or after 1 January 2017.
The concept of Equivalent CbC Report has been introduced which requires a Cyprus tax resident Constituent Entity of an MNE Group to file a partial CbC Report under the secondary mechanism (e.g. where there is no UPE or SPE filing), in cases where the UPE has refused to provide all required information to the Cyprus tax resident Constituent Entity. Since the Equivalent CbC Report filing falls under the secondary mechanism, it also applies with respect to Fiscal Years beginning on or after 1 January 2017. A requirement to maintain books and records supporting the information disclosed in the CbC Report is introduced.
MNE Groups should be taking steps to assess whether they are in scope of CbC Reporting based on the €750m consolidated group revenue threshold. MNE should ensure that they have the necessary systems in place to collect the information required to be included in the CbC Report. Determine which entity of the group will be the Reporting Entity. MNE should consider any implications related to the information to be reported such as those concerning Transfer Pricing.
Currently, no specific penalties have been introduced in Cyprus with respect to non-compliance with CbCR. In this respect, the general fines provided for in the Assessment and Collection of Taxes Law will apply (e.g., administrative penalties of €100). But specific penalties are likely to be introduced in the near future of a higher amount to provide a more effective disincentive for non-compliance. The submission of both the notification and the CbC report shall be completed annually in the English language and submitted electronically via Ariadne.