Cyprus signed the Organization of Economic Cooperation and Development (OECD) Multilateral Competent Authority Agreement (MCAA) on Country-by-Country (CbC) Reporting on 1st November 2016. Afterwards, the Cyprus Ministry of Finance issued a Decree pursuant to Article 6(16) of the Assessment and Collection of Taxes Law on Country-by-Country Reporting. This Decree is in accordance with the EU Directive 2016/881/EU demanding from all EU Member States to enact a Country-by-Country Reporting obligation in their national legislation based on the recommendations of the OECD Base Erosion and Profit Shifting.
The aforementioned Decree provides that a Cyprus tax resident company which belongs to a Multinational Enterprise (MNE) Group with consolidated annual revenue of €750 million and above must comply with the CbC reporting requirements.
MNE Groups with an ultimate Cyprus tax resident parent entity, are obliged to prepare and file an annual CbC report which includes specific financial data and other relevant information. Alternatively, any other entity of the group which is resident in Cyprus and is not the ultimate parent entity can be appointed as the surrogate parent entity. In this case, such entity will have to prepare and submit the CbC report, provided that:
- The ultimate parent entity is not resident in Cyprus;
- The ultimate parent entity is not required to file a CbC report in its country of residence, or despite the fact that it is obliged to submit a CbC report, there is no exchange of information mechanism in place with Cyprus;
- The country of tax residency of the ultimate parent entity does not have an adequate automatic exchange of information instrument with Cyprus regarding CbC reporting;
- The country of tax residency of the ultimate parent entity has been reported for systematic failure on exchanging information;
As Cyprus is a signatory to the OECD Multilateral Competent Authority Agreement (MCAA) of the exchange of CbC reports, any CbC report submitted in Cyprus will be forwarded to the tax authorities of the jurisdictions where a MNE Group operates provided that these jurisdictions signed the MCAA.
Cyprus tax resident constituent companies of a MNE Group must notify the Cyprus tax authorities of whether they are the reporting entity. In case they are not the reporting entity, then they should provide the tax authorities with the details of the reporting entity of the Group. According to the Decree, such notifications should be submitted before the end of each financial year.
MNE Groups are obliged to disclose on their CbC report the following data for each tax jurisdiction in which they operate:
- Detailed information regarding the amount of revenue, profit/loss before income tax, and the amount of income tax paid and accrued, the issue of share capital, accumulated retained earnings, the number or employees and tangible assets (other than cash or cash equivalents) with reference to each jurisdiction in which the MNE Group operates; and
- Identification of each constituent entity within the MNE Group, operating in a particular tax jurisdiction, with a broad indication of its economic activity;
The submission deadline for the first CbC report is on 20 October 2017.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.