Cyprus has confirmed its full support for the safe harbour rules under the Pillar 2 Side-by-Side arrangement, as allowed by EU Directive 2022/2523.
The Cyprus Minister of Finance issued a statement on 8 January 2026 regarding the Side-by-Side (SbS) arrangement for the Pillar 2 global minimum tax, recently endorsed by the BEPS Inclusive Framework.
The release highlights that, under Council Directive (EU) 2022/2523 of 14 December 2022, safe harbour provisions like those in the SbS arrangement can be applied if all EU Member States agree. Cyprus has confirmed its full support and consent for these safe harbour rules.
The Republic of Cyprus has consistently supported the OECD/G20 Base Erosion and Profit Shifting (BEPS) actions and the work undertaken to date by the OECD/G20 and the Inclusive Framework on BEPS in the field of international taxation. Although Cyprus is not a member of the OECD due to political considerations and is therefore unable to participate directly in consultations at the OECD level, it has nevertheless expressed its support for the outcomes of this work.
In particular, the statement issued by the OECD/G20 Inclusive Framework on BEPS in October 2021, which set out the fundamental principles for the development of the modalities of Pillar 1 and Pillar 2, was welcomed by the Ministry of Finance through a ministerial press release published in early October 2021.
Article 32 of Council Directive (EU) 2022/2523 of 14 December 2022 on ensuring a global minimum level of taxation for multinational enterprise groups and large-scale domestic groups in the Union (“Pillar 2”) provides for the application of safe harbour rules. However, this Article provides that all European Union (EU) member states must have given consent in order for an international set of rules and conditions to be a “qualifying international agreement on safe harbours”.
Accordingly, pursuant to Article 32 of the Pillar 2 Directive, the Republic of Cyprus provides its full assurance and consent to the following document and the safe harbour rules set out therein: OECD/G20 Base Erosion and Profit Shifting Project on Tax Challenges Arising from the Digitalisation of the Economy – Global Anti-Base Erosion Model Rules (Pillar 2), Side-by-Side Package, approved by the OECD/G20 Inclusive Framework on BEPS on 5 January 2026, and in particular the Side-by-Side Safe Harbour, the UPE Safe Harbour, the Simplified ETR Safe Harbour, the extension of the Transitional CbCR Safe Harbour, and the Substance-Based Tax Incentives Safe Harbour.
This statement supplements the statements on this topic dated 22 March 2023, 23 October 2023 and 24 July 2024.
Earlier, on 5 January 2026, the OECD issued a document with the title Tax Challenges Arising from the Digitalisation of the Economy – Global Anti-Base Erosion Model Rules (Pillar 2), Side-by-Side Package.
