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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]

Saudi Arabia Vision 2030: key progress facts

Saudi Arabia Vision 2030: Key Progress Facts

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Saudi Arabia Vision 2030: Key Progress Facts

Saudi Arabia’s Vision 2030 is a transformative economic and social reform plan aimed at reducing the Kingdom’s dependence on oil, diversifying its economy, and developing public service sectors such as health, education, infrastructure, recreation, and tourism. Launched in 2016 by Crown Prince Mohammed bin Salman, Vision 2030 has already made significant strides across various sectors, marking considerable progress towards its ambitious goals.

A story of transformation: VISIONN 2030 KINGDOM OF SAUDI ARABIA

Economic Diversification

  1. Growth in Non-Oil Revenue:
    Non-oil revenue has seen a substantial increase, with a 30% rise from SAR 201 billion in 2016 to SAR 261 billion in 2023, bolstered by new taxes, fees, and economic diversification efforts. The introduction of VAT in 2018 and other fiscal reforms have significantly contributed to this growth.
  2. Public Investment Fund (PIF):
    PIF’s assets have grown tremendously, with revenues reaching $88.22 billion in 2023, marking a 100% increase. PIF is pivotal in driving economic diversification through investments in sectors like real estate, infrastructure, technology, and entertainment.

Tourism and Entertainment

  1. Tourism Influx:
    Saudi Arabia has rapidly become a significant player in global tourism, welcoming 60 million tourists in the first half of 2024 alone. This surge is attributed to the development of mega-projects such as the Red Sea Project, and Al-Ula.
  2. Entertainment Industry:
    The Kingdom has significantly expanded its entertainment offerings, including hosting over 2,000 events, concerts, and cultural festivals annually. The establishment of the General Entertainment Authority has been crucial in these developments.

Infrastructure and Urban Development

  1. Mega-Projects:
    Vision 2030 has given rise to several ambitious mega-projects, including the Red Sea Project, aimed at developing luxury tourism along the Red Sea coast.
  2. Housing and Urban Development:
    The Sakani housing program has delivered over 200,000 housing units since its inception, increasing home ownership among Saudis to 62% in 2023. Additionally, urban development initiatives are improving the livability of cities and creating new economic opportunities.

Healthcare and Education

  1. Healthcare Expansion:
    Significant investments are being made to expand healthcare infrastructure, increase the number of hospitals, and improve the quality of healthcare services. The healthcare sector is expected to grow by 6.5% annually, with the establishment of new medical cities and hospitals.
  2. Educational Reforms:
    Education is being reformed to align with market needs, focusing on STEM fields and vocational training. Partnerships with international educational institutions have resulted in 15 new university collaborations, enhancing the quality and relevance of education.

Renewable Energy and Environmental Sustainability

  1. Renewable Energy Projects:
    Saudi Arabia is investing heavily in renewable energy, with projects like the Sakaka Solar Power Plant and Dumat Al Jandal Wind Farm leading the way. The goal is to produce 50% of the Kingdom’s electricity from renewable sources by 2030. As of 2023, renewable energy capacity has increased by 25%.
  2. Environmental Initiatives:
    The Saudi Green Initiative aims to plant 10 billion trees and reduce carbon emissions by 278 million tons annually. These efforts are part of broader plans to combat climate change and promote sustainability.

Business Environment and Regulatory Reforms

  1. Ease of Doing Business:
    The Kingdom has implemented numerous reforms to improve its business environment, including simplifying procedures for starting a business, obtaining construction permits, and protecting minority investors. These efforts have significantly enhanced Saudi Arabia’s ranking in the World Bank’s Ease of Doing Business index, climbing 30 places since 2016.
  2. Foreign Investment:
    New regulations allowing 100% foreign ownership in various sectors have attracted global investors, with FDI inflows reaching $5.5 billion in 2023. The government is actively promoting sectors like tourism, entertainment, healthcare, and technology to diversify its investment portfolio.

Social Reforms and Cultural Development

  1. Women Empowerment:
    Significant strides have been made in women’s empowerment, including granting women the right to drive, increasing female workforce participation to 33% in 2023, and promoting women in leadership positions.
  2. Cultural Development:
    The Kingdom is investing in preserving and promoting its cultural heritage. Initiatives to restore historical sites and promote cultural events are fostering a renewed sense of national identity and pride. Over 200 cultural events were held in 2023, attracting millions of participants.

Conclusion

Saudi Arabia’s Vision 2030 is making substantial progress in transforming the Kingdom’s economy and society. Through ambitious reforms and strategic investments, Saudi Arabia is well on its way to achieving its goals of economic diversification, social development, and global competitiveness. As Vision 2030 continues to unfold, Saudi Arabia is poised to become a leading global hub for tourism, investment, and innovation, driving sustainable growth and prosperity for future generations.

Thinking of expansion to Saudi Arabia? Our team is at your disposal for any support and guidance you might need. Contact us here.

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.

Saudi Arabia: an emerging business center

Expansion to Saudi Arabia: An emerging business center

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Expansion to Saudi Arabia: An emerging business center

In recent years, Saudi Arabia has emerged as a compelling destination for businesses seeking new opportunities and growth. With ambitious economic reforms, strategic initiatives, and a dynamic business landscape, the Kingdom is poised to become the next global business center. Saudi Arabia’s hype and the fact it is attracting increasing attention from businesses around the world is not based on luck.

Saudi Arabia’s non-oil sector contributed 50% of GDP for the first time last year. With the country’s unprecedented economic transformation well underway, the horizon for Saudi Arabia is bright with the promise of continued growth.

  1. Vision 2030: At the heart of Saudi Arabia’s transformation is Vision 2030, launched in 2016, a bold and ambitious blueprint for diversifying the economy, reducing dependency on oil, and fostering sustainable growth across various sectors. Through Vision 2030, the Kingdom has managed to create a vibrant and competitive business environment that attracts investment, stimulates innovation, and drives economic prosperity as well as promoting a sustainable community.
  1. Strategic Location: Situated at the crossroads of three continents, Saudi Arabia enjoys a strategic geographic location that positions it as a gateway to lucrative markets in the Middle East, Africa, and Asia. With modern infrastructure, world-class transportation networks, and state-of-the-art logistics facilities, the Kingdom offers unparalleled access to global trade routes and investment opportunities.
  1. Economic Diversification: In line with Vision 2030 objectives, Saudi Arabia is actively diversifying its economy by investing in non-oil sectors, for instance tourism, entertainment, technology, healthcare, renewable energy, and manufacturing. These strategic investments are creating new business opportunities, fostering innovation, and driving sustainable growth across diverse industries.
  1. Business-Friendly Reforms: The Saudi government has implemented several business-friendly reforms to streamline regulations, enhance the ease of doing business, and attract foreign investment. As a result, these reforms include initiatives to simplify company registration procedures, improve intellectual property protection, and enhance transparency and accountability in the business environment.
  1. Investment Incentives: Saudi Arabia offers a range of incentives and support mechanisms to attract foreign investment, including tax incentives, financial incentives, and access to government grants and subsidies. Additionally, the Kingdom has established special economic zones and investment hubs to encourage investment in strategic sectors and regions.
  1. Thriving Business Ecosystem: Saudi Arabia boasts a thriving business ecosystem characterized by a skilled workforce, vibrant entrepreneurship culture, and robust support infrastructure. From incubators and accelerators to venture capital funds and innovation centers, the Kingdom offers a conducive environment for startups, SMEs, and multinational corporations alike to thrive and grow.

Saudi Arabia’s strategic vision, geographic location, economic diversification efforts, business-friendly reforms, investment incentives, and thriving business ecosystem position it as the next business center on the global stage. As businesses increasingly recognize the Kingdom’s potential, demand for expansion to Saudi Arabia is increasing dramatically as the country is poised to play a pivotal role in shaping the future of regional and international trade, investment, and innovation.

Application deadline extended: 2013 Cyprus banks' haircut

Application deadline extended: Partial compensation of the 2013 haircut on Cyprus banks’ deposits

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Application deadline extended: Partial compensation of the 2013 haircut on Cyprus banks’ deposits

In its announcement on 14/05/2024, the Cyprus Ministry of Finance informs of the reopening of the electronic service for submitting applications by affected natural and legal persons regarding their participation in the Replenishment Scheme of the National Solidarity Fund. Applications are accepted via the Ministry’s online service from 14 May 2024 until 25 May 2024.

It is pointed out that the affected Natural and Legal Persons should have the characteristics of a “private client” and their deposits and securities have been reduced during 2013 due to the implementation of consolidation measures in the two systemic Banks (Bank of Cyprus and Laiki Bank).

Please note that access to the electronic service for submitting an electronic Application for participation is made through the CY Login Profile as follows:
• For Natural Persons with a Cypriot identity card or residence permit in Cyprus (ARC) as well as Legal Persons with a registration number in Cyprus –> Registration and identification on the CY Login Government Portal (formerly Ariadne) is required.

• For Natural Persons who do not have a Cypriot identity card and are not residents of Cyprus as well as Legal Persons who do not have a registration number in Cyprus –> They are required to be registered on the Government Portal CY Login, and they will be identified when submitting their Application through the provision of certain additional items and documents.

Participation in the Replenishment Scheme of the National Solidarity Fund is done only via the submission of an electronic application and applicants are invited to submit their application no later than 25 May 2024, as the Ministry notes that it will not be possible to submit electronic applications after that date.

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