Cyprus signs OECD Multilateral Instrument

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Cyprus has signed the Multilateral Convention to implement tax treaty related measures to prevent Base Erosion and Profit Shifting (“Multilateral Instrument” or “MLI”). More than 68 countries, including Cyprus, signed the Convention on 7 June 2017 at Paris.

The convention is a key outcome of the OECD/G20 Base Erosion and Profit Shifting (BEPS) project, which aims to offers concrete solutions for governments to close the gaps in existing international tax rules by transposing results from the OECD/G20 BEPS project into bilateral tax treaties worldwide.

The convention enables all signatories, inter alia, to meet treaty-related minimum standards that were agreed as part of the final BEPS package, including the minimum standard for the prevention of treaty abuse under Action 6.

The convention will enter into force after signatories have completed their domestic requirements and deposited their instruments of ratification with the OECD.

Cyprus: FATCA data submission begins for 2017

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The Cyprus Tax Department has notified financial institutions and their representatives that the data submission under the FATCA Intergovernmental Agreement for the year 2016 has started. This process will be performed through the Government Gateway Portal ‘Ariadni’ using XML files.

The submission process requires the following steps:

  • Register with the Government Gateway Portal ‘Ariadni’ ( following the relevant procedures.
  • Register with the FATCA / CRS e-service using the option ‘Financial Institution Registration’ or ‘Representative Registration’.
  • Submit the information selecting the option ‘Submit XML Files’.

With the submission of every XML file a validation check will be performed (against the XSD files) and the user will be informed immediately. Additional checks will be performed regarding the content of each file, at a later stage, with the user to be informed through the email address stated during the FATCA/CRS e-service registration.

Cyprus signs Protocol to amend the double tax agreement with San Marino

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A Protocol amending the Convention for the Avoidance of Double Taxation with respect to Taxes on Income was signed on May 19th 2017 in Nicosia. On behalf of the Republic of Cyprus Mr. Ioannis Kasoulidis, Minister of Foreign Affairs of the Republic of Cyprus signed the Protocol and on behalf of the Republic of San Marino the Protocol was signed by Mr. Nicola Renzi, Minister of Foreign Affairs.

The text agreed between the two Contracting States, will contribute to further developing trade and economic links between Cyprus and San Marino while enabling the enhancement of links with other Jurisdictions. The Government will continue to actively expand the already wide tax treaty network of Cyprus, thereby enhancing the attractiveness of doing business from Cyprus.

Cyprus: Finance Ministry issues revised decree on country-by-country reporting

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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.

Cyprus: Double tax agreement with Luxembourg

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The governments of Cyprus and Luxembourg have signed a convention for the elimination of double taxation with respect to taxes on income and on capital and the prevention of tax evasion and avoidance. The agreement was signed on 8 May 2017 in Nicosia.

The agreement is based on the OECD Model Convention for the Avoidance of Double Taxation on Income and on Capital and incorporates all the minimum standards of the Base Erosion Profit Shifting (BEPS) project, as issued by the OECD /G20 in October 2015, those of BEPS Action 6 (Treaty Abuse) and BEPS Action 14 (Making Dispute Resolution Mechanisms More Effective). Furthermore it includes the exchange of financial and other information in accordance with the relevant Article of the Model Convention.

Under the agreement, there is no withholding tax rate on dividends if the beneficial owner is a company (other than a partnership) which holds directly at least 10 per cent of the capital of the company paying the dividends; otherwise 5%. Interest arising in a contracting state and paid to a resident of the other contracting state shall be taxable only in that other state. Royalties arising in a contracting state and beneficially owned by a resident of the other contracting state shall be taxable only in that other state.

Cyprus signs DTA with Barbados

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On 3 May 2017, the Convention for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income between the Republic of Cyprus and Barbados was signed in London. The text of Double Taxation Agreement (DTA) agreed between the two jurisdictions will enhance the trade and economic relations, between Cyprus and Barbados as well as with other countries.

The Convention is based on the OECD Model Tax Convention for the Avoidance of Double Taxation.

Cyprus extends deadline for the submission of personal tax returns for 2016

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The tax department of Cyprus has approved an extension of the deadline for filing tax returns for the tax on personal income for the year 2016 (Form TD 1) in paper and electronic formats. In paper form, deadline for submission of tax returns extended until May 2 2017 years. For e-filing, deadline extended until 30 September 2017 years.

It is noted that the income tax can be paid up to June 30 2017 years; in this case, no penalties and fines will not be imposed.