Cyprus Parliament aligns law with EU Directive on Corporate Tax Transparency

On 21 November 2024, the Cyprus Parliament passed legislation amending the Companies Law to align with Directive (EU) 2021/2101. This directive mandates public disclosure of income tax information by large multinational enterprises (MNEs), enhancing transparency and accountability in corporate tax practices.?

The move strengthens Cyprus’s commitment to combat corporate tax evasion and ensures compliance with European Union standards. The primary aim of this legislation is to bolster corporate tax transparency, enabling public Scrutiny, investor confidence and fair taxation.??

Cyprus faced criticism from the European Commission for delays in adopting the directive, which had a compliance deadline of 22 June 2023. The European Commission issued a reasoned opinion on 23 May 2024, urging Cyprus to fulfil its obligations. This legislation brings the country back into alignment, addressing both the delays and the potential reputational risks associated with non-compliance.?

Scope of the new requirements?

The legislation targets multinational enterprises (MNEs) with total consolidated revenue exceeding EUR 750 million in each of the last two consecutive financial years. These requirements apply regardless of whether the companies are headquartered in the EU or elsewhere.?

Key disclosure obligations?

Country-by-Country (CbC) Reporting?

• Income tax information must be disclosed for each EU Member State and for non-EU jurisdictions listed in Annex I (non-cooperative jurisdictions) or listed consecutively for two years in Annex II of the EU’s Council conclusions on tax purposes.?

• For other jurisdictions, aggregated disclosure is permitted, though enterprises may opt for greater detail.?

Required Information for Public Reporting?

The reports must include the following details for each applicable jurisdiction:?

• The name of the ultimate parent or standalone undertaking.?

• The financial year concerned, the currency used, and a list of subsidiaries within the EU or in Annex-listed jurisdictions.?

• A brief description of the business activities.?

• The number of employees on a full-time equivalent basis.?

• Revenues, calculated as defined in the Directive, excluding specific adjustments such as dividends from affiliates.?

• Profit or loss before income tax.?

• Income tax accrued and paid on a cash basis.?

• Accumulated earnings at the end of the financial year.?

Timeline for Publication?

Public CbC reports must be published within 12 months of the financial year’s balance sheet date. Reports must be available online in at least one official EU language, free of charge.?

Implications for Businesses?

The legislation imposes new compliance responsibilities on qualifying businesses:?

1. Reporting Obligations: Large enterprises must maintain detailed records and ensure timely publication of CbC reports.?
2. Increased Transparency: Public availability of tax data enhances scrutiny from stakeholders, including regulators, investors, and civil society organisations.?
3. Alignment with EU Standards: Compliance ensures consistency across EU jurisdictions, fostering a level playing field for businesses operating internationally.?

Assessment?

This law represents a pivotal step in Cyprus’s efforts to align with EU transparency standards while reinforcing its commitment to combating tax evasion. By mandating public income tax disclosures, the legislation increases corporate accountability and strengthens Cyprus’s position as a responsible jurisdiction for international business.?

Businesses are urged to review their compliance frameworks to meet the new obligations and contribute to a more transparent and equitable corporate environment.?

For more information, feel free to contact any member of our Corporate team or contact us at [email protected].?