Insight in Brief

The long-awaited Pillar II legislation (N. 151(I)/2024) was approved by the Cyprus House of Representatives on 12 December 2024 and published in the Government Gazette on 18 December 2024. The legislation effectively implements the provisions of the EU Directive 2022/2523 of 14 December 2022 on ensuring a global minimum level of taxation for multinational enterprise groups (“MNEs”) and large-scale domestic groups within the EU.

The legislation introduces a 15% minimum effective tax rate, targeting MNEs with consolidated revenues of at least €750 million. It introduces three main measures with the following effective dates:

The IIR will apply to the low-taxed income of the parent entity, as well as the low-taxed income of its subsidiaries to ensure that the overall income is taxed at a rate of at least 15%. The UTPR will apply to ensure that a top-up tax is paid in cases where the 15% effective tax rate is not collected under an IIR.  

The DMTT, which applies alongside the IIR, will enable Cyprus to retain taxing rights with respect to Cyprus low-taxed profits in case those profits would have been taxed in the parent entity’s jurisdiction under IIR or in the jurisdiction of a related company under UTPR. This framework reflects Cyprus’s commitment to aligning with global tax reforms while maintaining a transparent and competitive tax regime.