Tag: EU

Pillar Two - Amended legislation in the Cyprus tax system

Pillar Two: EU Directive rules on 15% Minimum tax on MNE & Large Scale Domestic Groups applicable in Cyprus law

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Pillar Two: Global Minimum Tax on MNE and Large-Scale Domestic Groups – Cyprus officially transposes the EU Directive in the local law  

On 12 December 2024, the Cyprus House of Representatives approved the transposition of the EU Directive 2022/2523 in the Cyprus national law, regarding the legislation on the Global Minimum Level of Taxation for Multinational Enterprise Groups and Large-Scale Domestic Groups.

This legislation ensures the application of a minimum tax rate of 15% for these groups with annual consolidated revenues of at least €750 million. The new provisions introduce a “top-up tax” which will be imposed on the applicable parties, whenever the effective tax rate in a specific jurisdiction falls below 15%.

Below is a summary of the law’s provisions, its applicable parties, and the effective application date:

Provisions introduced Application Effective Application Date 
Qualified Income Inclusion Rule (QIIR) Applies to the results of the local Parent and its local subsidiaries Fiscal years beginning on or after January 2024  
Qualified Undertaxed Profits Rule (QUTPR)Imposes an additional top-up tax, not charged under CIT Fiscal years beginning on or after 1 January 2025 
Domestic Minimum Top-Up Tax (DMTT) Applies to constituent entities and joint venture entities located in Cyprus. It takes priority over QIIR and QUTPR. Fiscal years beginning on or after 1 January 2025 

Given the immediate implementation of the new provisions and the penalties for non-compliance, we recognize the urgency of taking swift action. Our team of experts is here to guide you through the complexities of Pillar Two regulations.

Contact us for more information. 

Author’s comment: The long-awaited increase in the minimum tax rate to 15% across the EU has eventually been implemented in the Cyprus’ local law. However, its applicability is restricted to large international groups with significant size, activity, and revenue. 

Transfer Pricing: Cyprus tax system, by Nobel Trust

Transfer Pricing: Amended Legislation in the Cyprus Tax System

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Transfer Pricing: Amended Legislation in the Cyprus Tax System

Cyprus tax resident companies engaging in intercompany transactions with related parties fall within the amended Transfer Pricing (TP) regulations which aim to ensure that transactions are conducted at arm’s length. By aligning the Cyprus tax system with the OECD Transfer Pricing Guidelines, the updated regulations establish a solid framework for managing cross-border transactions.

Therefore, if you own or operate a business in Cyprus, it is time to get familiar with the new TP laws and the several important obligations they bring, as they are effective from 1 January 2022.  

Key Definitions

  • Cyprus Tax Residents: Cyprus tax-resident entities and Permanent Establishments (PEs) of non-resident entities engaged in transactions with related parties.
  • Related Parties: Companies or individuals are deemed related if they (a) directly or indirectly hold at least 25% of the voting rights or share capital, or (b) have the right to at least 25% of the profits of a company.
  • Arm’s length principle: Pricing for goods, services, royalties, and loans between related parties must be in line with market conditions.

Reporting Obligations

Entities engaging in such transactions have an obligation to submit a Summary Information table (SIT) regardless of the value of the transactions.

SIT

  • The SIT must be filed together with the annual Income Tax Return.
  • It includes high-level details of intercompany transactions, such as the counterparties involved, categories of transactions, and their value.
  • A €500 penalty is imposed for late or non-submission of the SIT.

In addition, they are required to prepare and keep a record of the relevant TP documentation, being a Local File and Master File, in case they exceed the specified thresholds.

Thresholds

  • Any type of intercompany transaction (i.e., goods, services, intellectual property) exceeding €1.000.000 per category.
  • Financing transactions (i.e., loans) exceeding €5.000.000.

Local File

  • It must be prepared before the tax return filing deadline.
  • It includes a transfer pricing study that demonstrates compliance with the arm’s length principle.
  • It must be submitted to the Cyprus Tax Department (CTD) within 60 days upon request. The penalties for late submission vary from €5.000 to €20.000.

Master File

  • It is required for multinational enterprise groups where Cyprus acts as the Ultimate Parent Entity (UPE) or Surrogate Parent Entity (SPE), and the group meets the Country-by-Country Reporting requirements (with consolidated revenues exceeding €750 million).
  • It provides an overview of the group’s global business operations, organizational structure, and overall transfer pricing policies.
  • It must be submitted within 60 days upon request from the CTD.
  • The penalties for late submission vary from €5.000 to €20.000.

Advance Pricing Arrangement (APA)

An APA provides certainty for taxpayers regarding the application of transfer pricing rules to specific transactions. Businesses can apply for an APA with the Tax Commissioner, where it can pre-approve the TP methods used or the pricing of cross-border transactions.

  • The Tax Commissioner issues a decision within 10 months.
  • The APA is valid for a maximum of four years from the application date.

We understand that the penalties for non-compliance can be significant, therefore it is of high importance to take appropriate action in advance. Our team of experts is here to help you navigate the complexities of the transfer pricing changes. Whether you need assistance in understanding your reporting obligations or preparing the required documentation for your local entity or multinational group, we are ready to support you every step of the way.

Contact us here for more information.

New Tax Landscape for Non-UK Domiciled Individuals

New Tax Landscape for Non-UK Domiciled Individuals

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New Tax Landscape for Non-UK Domiciled Individuals

On October 30, 2024, the UK government officially confirmed that its non-domicile (“non-dom”) regime will be abolished effective April 6, 2025. This regime has long been a preferred option, particularly for high-net-worth individuals (“HNWIs”), who are likely to face significant changes to their tax obligations, prompting many to consider relocating to more tax-friendly jurisdictions.

Cyprus: A Compelling Alternative for HNWIs

Cyprus, with its favorable non-dom tax scheme, is an attractive option for individuals seeking a tax-efficient jurisdiction.

To establish tax residency in Cyprus, individuals can either reside in Cyprus for 183 days in a tax year or meet the “60-day rule”.

Under the “60-day rule”, one must spend a minimum of 60 days in Cyprus, maintain a residence, and have professional or business ties within Cyprus, amongst others. This scheme is designed to provide immediate tax relief for individuals who make Cyprus their primary residence without requiring long-term commitments.

Foreigners who become Cyprus tax resident and non-dom (subject to VISA requirements for non-EU citizens) benefit from a well-rounded combination of tax and non-tax benefits both at the personal and corporate level, as outlined below:

(a) Tax Benefits

  • Exemption from tax on dividend income and interest income
  • Exemption from tax on gains from selling securities/titles
  • No inheritance, gift, estate, or capital gains tax (except on Cyprus immovable property)
  • The first Euro 19,500 of emoluments is tax-free for all employees
  • 50% tax exemption for employees whose remuneration exceeds Euro 55,000 per annum for a period of 17 years
  • 20% tax exemption for employees whose remuneration is below Euro 55,000 (or up to Euro 8,550) for a period of 7 years, subject to conditions
  • Special tax rate of 8% on income generated by asset managers
  • Favorable IP regime, allowing Cyprus IP companies to achieve an effective tax rate of up to 2.5% on qualifying profits from IP exploitation

(b) Non-Tax Benefits

  • High quality of life in a low-crime society with a welcoming culture
  • Prime geographical location with a pleasant Mediterranean climate
  • Advanced healthcare and educational facilities
  • Cost-effective and straightforward establishment and maintenance of legal entities

Cyprus stands out as an ideal destination for individuals looking to safeguard their wealth and optimize their tax planning. At Nobel, we are committed to working closely with our clients to guide them through new regulations and provide personalized solutions tailored to their unique needs. Our dedicated team of professionals is ready to assist you in examining the implications of these upcoming changes, as well as to recommend potential relocation and investment options. Contact us here for more information.

Cyprus: investment funds centre in the EU

CYPRUS: A leading investment funds centre in the EU

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CYPRUS: A leading investment funds centre in the EU

Cyprus has emerged into a leading investment funds centre in Europe offering direct access to key markets. The island is an ideal investments gateway into the European Union and a portal for investments outside the EU, particularly into the Middle East and India. Cyprus’ competitive advantages are further enriched by a robust and transparent legal and regulatory framework and a versatile tax regime.

CYPRUS-A-leading-investment-funds-centre-in-the-EU-Sep-2024Download

For more information contact us here.

Nobel Trust offering multi-family office services for over 15 years

Nobel’s 15-year milestone in multi-family office services

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Nobel’s 15-year milestone in multi-family office services

Wealthy families often face numerous challenges in dealing with their wealth and international affairs. Some of them address their challenges by having a combination of in-house professionals and outsourced services to 3rd party advisers, while others have resources to establish their own single-family office, hiring dedicated professionals to handle their wealth and daily needs.

Family office services range from the more sophisticated corporate and personal structuring for operations, asset protection and management as well as succession planning, to the financial and legal administration of structures and family affairs and the provision of services related to the well-being and personal needs of the family as well as philanthropic wishes.

Nobel's 15-year milestone in multi-family office services.

At Nobel, we are proud of our client care, ability to multi-task and find solutions to complex matters. Since our establishment, we have identified the need to provide bespoke services to families who have demanding lifestyles and a need for diverse professional expertise, and have managed to run a successful multi-family office.

One of our main success stories is an international family active predominantly in the real estate and hotel management services, whom we have been servicing for more than 10 years. The advisers of the family initially approached our Cyprus office (Nobel Trust Ltd) to seek assistance with the establishment and management of an international holding company. The request was dealt with by our corporate administration team with efficiency and that was the beginning of a professional relationship of trust which is still ongoing. Ten years after, and we are now handling a corporate structure with more than 30 international companies with a range of assets all over the world, complicated treasury and financial transactions with international counterparties and complicated due diligence aspects, administering international litigation matters, managing succession planning structures and handling day-to-day administrative tasks for the benefit of the family members who live in different parts of the world. At all times we are on top of communication with different advisers, banking institutions, government authorities and international service providers and serve as the main advisers to provide holistic solutions to the family members.

A multi-family office provides an affordable and efficient solution for wealthy families and our Cyprus office is a prime example of a successful one.

Following the recent changes in the Greek legislation with attractive tax incentives for relocation of wealthy individuals and families to Greece, as well as the new legislation for the establishment of special purpose vehicles to serve as a single-family office for wealthy families, the Greek market requires specialized professional services to serve the needs of family offices.

Our Greek office (Nobel Hellas SA) shares the values and experience of our Cyprus Group, and through long-standing business co-operations internationally, can service the needs of wealthy families relocating to Greece.

For more information you can contact either our offices in Nicosia [email protected] or Athens [email protected]

The Council of the EU adopts AML package

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Anti-Money Laundering: The Council of EU adopts the AML package.

AMLA HQ in Frankfurt

The adoption of the new anti-money-laundering (AML) rules aims to protect EU citizens and the EU’s financial system against money laundering and the financing of terrorism.

The new legislative package transfers all private sector anti-money laundering and counter-terrorism financing (AML/CFT) rules to a directly applicable regulation, while a directive will handle the organization of national authorities fighting these crimes.

The regulation uniformly harmonizes AML rules across the EU, closing fraud loopholes. It extends AML obligations to new entities, including most of the crypto sector, luxury goods traders, and football clubs/agents. It also imposes stricter due diligence, beneficial ownership regulations, and a €10k limit on cash payments.

The directive enhances national AML system organization, specifying clear cooperation rules for financial intelligence units (FIUs) and supervisors.

Additionally, the new legislative package establishes the European Authority for Anti-Money Laundering and Countering the Financing of Terrorism (AMLA), which will have direct and indirect supervisory powers over high-risk entities in the financial sector. AMLA aims to enhance the AML/CFT framework’s efficiency by integrating national supervisors and ensuring compliance. It will also support non-financial sectors and coordinate with financial intelligence units (FIUs).

AMLA can impose financial penalties for serious, systematic, or repeated breaches of AML/CFT requirements. The directive mandates EU member states to provide centralized bank account register information via a single access point for FIUs. A separate directive ensures national law enforcement authorities have access to these registers and harmonizes bank statement formats. This access is crucial for fighting crime and tracing criminal proceeds.

The new AML directive also prescribes that EU member states make information from centralised bank account registers – containing data on who has which bank account and where – available through a single access point.

This is the final step of the adoption procedure. The texts will now be published in the EU’s Official Journal and enter into force.

The AML regulation will apply three years after the entry into force. Member states will have two years to transpose some parts of the AML directive and three years for others.

AMLA will be based in Frankfurt and start operations in mid-2025.

Official source:

Council of the EU / Press release / 30 May 2024
Anti-money laundering: Council adopts package of rules

Click here to check out our related article: 24 Jan 2024.

Partial compensation of the 2013 haircut on Cyprus banks’ deposits

Partial compensation of the 2013 haircut on Cyprus banks’ deposits

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Partial compensation of the 2013 haircut on Cyprus banks’ deposits

The Ministry of Finance of the Republic of Cyprus released a reminder announcement on 8 April 2024 regarding the launch of the electronic service “Participation in the Replenishment Scheme of National Solidarity Fund”. This scheme has been prepared in collaboration with the Deputy Ministry of Research with the purpose of partially contributing to the replenishment of losses that natural and legal persons incurred during the Cyprus bank haircuts of 2013.

The application deadline is on 30 April 2024 and the following eligibility criteria apply.

Submission of an online application:
• Both natural persons and legal entities to have the characteristics of a “retail client” and whose deposits and securities were impaired in 2013.
• Natural persons: people be over the age of 18; persons representing a deceased person; to have a Cyprus identity card or Cyprus residence permit (ARC).
• Legal persons: include but not limited to Companies, Associations, Foundations, Religious Institutions, Partnerships.

Both registration and authentication are required on the Government Portal CY Login portal (former Ariadne), for natural persons with a Cyprus identity card or Cyprus residence permit (ARC) and for legal entities with a Cyprus registration number.

Additional details at submission will be requested for individuals who do not have a Cyprus identity card and are not Cyprus residents, as they will not be authenticated through the Government Internet Portal CY Login. The same applies to legal entities which do not have a registration number in Cyprus.

Furthermore, in respect of the information provided regarding the impairment, the following requirements apply depending on the bank:
• Bank of Cyprus: For impairment of deposits and securities at the Bank of Cyprus, it is requested to complete only any bank account number or Investor share code, without completing the amount that was impaired.
• Popular Bank: For impairment of deposits and securities at the Popular Bank, only information for amounts that were impaired should be provided.

In addition, as far as natural persons are concerned, in the case of a joint account or joint investor share code, each individual should make a separate application.

Following submission of the applications, the potential beneficiaries of the Fund will be assessed and identified, and subsequently, the costing will be processed, and the Partial Replenishment Scheme will be prepared. More details and instructions will be provided to the applicants at a later stage.

Our team is at your disposal for any support and guidance you might need regarding the Replenishment Scheme applications.

Official sources:

Announcement MoF Press Office 20.12.2023

&

Reminder for online submission of applications MoF Press Office 08.04.2024

Cyprus Naturalisation: new criteria

Cyprus Naturalisation: Revised application criteria

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Cyprus Naturalisation: Revised application criteria

On the 22nd of March 2024, the Ministry of the Interior announced the receipt and examination of applications for naturalization submitted in accordance with the provisions of the Population Register (Amendment) Law of 2023.

The qualifications for naturalization, pursuant to article 111B(1) of the Population Register Law, which must be met cumulatively to submit an application for naturalization are the following:

  1. Legal and continuous residence for 12 months immediately preceding the date of application. Periods of absence that do not exceed a total of 90 days do not interrupt the stated period.
  2. During the 10 years immediately preceding the 12-month period, legal residence for cumulative periods of not less than 7 years.
  3. Good character.
  4. Adequate knowledge of Greek language at level B1.
  5. Sufficient knowledge of basic elements of the modern political and social reality of the Republic of Cyprus.
  6. Appropriate accommodation and stable and regular financial resources sufficient for maintaining the applicants themselves and their family members.
  7. Intention to reside in the Republic of Cyprus.

According to article 111B(2), the qualifications are differentiated for the individuals residing in the Republic of Cyprus for the purpose of highly qualified employment in companies which are determined by the Decision of the Council of Ministers (no. 92.018, dated 15/10/2021), regarding the Strategy for Attracting Businesses for Activities or/and Expansion of their Activities in Cyprus, as well as for their family members. The following companies fall into this category:

  1. Businesses/companies of foreign interests operating in the Republic of Cyprus and operating independent offices in Cyprus, which are housed in suitable premises, separate from any private residence or other office,
  2. Cypriot shipping companies,
  3. Cypriot high-tech/innovation companies with products related to the aerospace industry, computers, IT, technology and communication, pharmaceuticals, biomedical equipment, research and development equipment, electrical machinery, chemicals, non-electrical machinery,
  4. Cypriot pharmaceutical companies or Cypriot companies active in the fields of biogenetics and biotechnology,
  5. The companies that are already registered in the Register of Foreign Companies of the Civil Registry and Migration Department.

The qualifications for the individuals falling under the provisions of article 111B(2) as well as for their family members, which must be met cumulatively, are as follows:

  1. Legal and continuous residence for 12 months immediately preceding the date of application. Periods of absence that do not exceed a total of 90 days do not interrupt the stated time period.
  2. During the immediately preceding 10 years from the 12-month period, to have legal residence for cumulative periods of no less than 4 or 3 years depending on the level of knowledge of the Greek language, i.e. A2 or B1 respectively. Periods of absence that do not exceed a total of 90 days per year do not count as absence.
  3. Good character.
  4. Adequate knowledge of the Greek language at level A2 or B1.
  5. Sufficient knowledge of basic elements of the modern political and social reality of the Republic.
  6. Appropriate accommodation and stable and regular financial resources sufficient for the maintenance of themselves and their family members.
  7. Intention to reside in the Republic of Cyprus.

Our team is happy to provide you with detailed information regarding the naturalization criteria and guide you through the application procedure. Please contact us at +357 22022777 or send us an email.

Cyprus Registrar abolishes annual company fee

Termination of annual company fee

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Termination of annual company fee

On the 21st of March the Department of the Cyprus Registrar of Companies and Intellectual Property announced that the annual levy of €350 is abolished from 2024 onwards. The annual fees for years 2011–2023 are still applicable.

It has also been clarified that the companies which have already settled their annual fee for 2024 will be refunded.

This measure will offer great relief and support to Cyprus companies and serves as a step to enhancing the local business environment.

Official Source