In brief
On 20 November 2020 the EU Code of Conduct Group (Business Taxation) (the “Group”) issued a report, approved by ECOFIN on 27 November 2020, whereby the Cyprus NID regime has been assessed by the Group as "not harmful" since its introduction as from 1 January 2015.
In detail
As a background, the Group requires EU Member States to refrain from introducing any new harmful tax measures ("Standstill") and amend any laws or practices that are deemed to be harmful in respect of the principles of the Group ("Rollback"). For the purpose of identifying such harmful measures the Group set out the criteria against which any potentially harmful measure is to be tested.
Since 2018 the Group set as one of their work priorities the monitoring and review from a harmful tax perspective all EU Member States' NID regimes. As part of the Cyprus NID review by the Group, the Group recommended certain amendments to the Cyprus NID regime which were enacted by Cyprus earlier this year. For more details please refer to our Tax Update newsletter N-13-2020.
Following the above, the Group published in its 20 November 2020 report to the ECOFIN the Group's ‘not harmful' decision on the Cyprus NID as part of its Standstill review process. The ECOFIN itself approved the Group's report on 27 November 2020.
The takeaway
This is a positive development for the Cyprus NID regime which we expected following the recent amendments made to the Cyprus NID regime that were, in part, due to earlier recommendations of the Group.
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