Cyprus 2025 Tax Reforms. Aligning with EU Directives & Global Standards

In 2025, Cyprus is set to implement several significant tax reforms in alignment with European Union directives and global tax standards. Key changes include:

 

1.    Implementation of Global Minimum Tax (Pillar Two):

 

• Income Inclusion Rule (IIR) and Undertaxed Profits Rule (UTPR): Cyprus has enacted legislation introducing the IIR and UTPR, effective January 1, 2025. These rules apply to multinational enterprise (MNE) groups and large-scale domestic groups with annual consolidated revenues exceeding €750 million, ensuring a minimum effective tax rate of 15%.

 

• Qualified Domestic Minimum Tax (QDMTT): Alongside the IIR and UTPR, Cyprus will implement the QDMTT from January 1, 2025. This measure ensures that in-scope entities are subject to a minimum effective tax rate of 15% on profits arising within Cyprus, aligning with the EU’s Pillar Two Directive.

 

2.    Corporate Tax Rate Adjustment:

 

• The Cyprus Ministry of Finance is preparing a comprehensive tax reform, which includes increasing the corporate tax rate from 12.5% to 15%. This adjustment aligns with the global minimum tax standards and is part of broader efforts to enhance the competitiveness and fairness of the Cypriot tax system.

 

3.    Enhanced Tax Transparency for Digital Platforms (DAC7):

 

• Effective January 1, 2025, Cyprus will extend mandatory automatic exchange of information to include data on sellers operating through digital platforms. This initiative, part of the EU’s DAC7 directive, aims to improve tax transparency and ensure fair taxation in the digital economy.

 

 

These reforms demonstrate Cyprus’s commitment to adhering to EU directives and international tax standards, promoting transparency, fairness, and competitiveness within its tax system.

 

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