Cyprus and Sweden signed their first-ever amending protocol to a 1988 income tax treaty on 3 July 2026, aligning it with OECD base erosion and profit shifting standards.
Cyprus and Sweden signed an amending protocol to their income tax treaty on 3 July 2026 in Lefkosia, with Cyprus Minister of Finance Makis Keravnos and Swedish Ambassador Martin Hagström serving as signatories. The protocol marks the first revision to the original treaty, which was signed on 25 October 1988.
The update aligns the 1988 agreement with the Organisation for Economic Co-operation and Development (OECD) Base Erosion and Profit Shifting standards.
Sweden had faced constitutional obstacles implementing the Multilateral Instrument—a faster mechanism for bulk-updating bilateral treaties—which prompted the two countries to pursue this standalone amending protocol instead.
The preamble now reflects current OECD norms. Article 23, governing Mutual Agreement Procedure, now allows either contracting state to field a case rather than limiting submissions to the state of residence. Article 24, covering information exchange, has been completely replaced with OECD-aligned language. A new Article 25A introduces a Principal Purpose Test, denying treaty benefits to arrangements or transactions where securing those benefits constituted a principal purpose, unless the benefit aligns with the treaty’s underlying intent.
The protocol enters into force 30 days after both nations exchange ratification instruments and applies from 1 January of the following calendar year.
Cyprus is signalling the agreement as part of its broader strategy to strengthen its standing as an international business centre while advancing tax transparency and standards compliance.
Earlier, the Council of Ministers of Cyprus approved the signing of a protocol to amend the existing income tax treaty with Sweden on 24 April 2026.
