09.20
COUNTRY-BY-COUNTRY REPORTING - SECONDARY REPORTING MECHANISM
CLARIFICATION ON BILATERAL AGREEMENT BETWEEN CYPRUS AND THE UNITED STATES

Tax Updates

The Cyprus Tax Department informed all legal entities and their representatives on the 4th September 2020 that the bilateral Competent Authority Arrangement (CAA) for the exchange of Country-by-Country (CbC Reports) between Cyprus and the United States of America which is currently under negotiation, is expected to be effective for Reporting Fiscal Years starting on or after 1 January 2020.

Consequently, in the case where the Ultimate Parent Entity of a Multinational Group of Enterprises (MNE) is tax resident in the United States of America, the secondary filing mechanism should be triggered for Reporting Fiscal Years starting on or after 1 January 2019 and before 1 January 2020.

The secondary reporting mechanism applies where no surrogate parent entity has been appointed and one or more of the following circumstances apply:

  • the ultimate parent entity of an MNE Group is not required to provide a CbC Report in its jurisdiction of tax residence;
  • the jurisdiction in which the ultimate parent entity of that MNE Group is resident for tax purposes does not have a qualifying competent authority agreement in effect with Cyprus (by the due date for filing the CbC Report) that provides for the exchange of CbC Reports; or
  • there has been a systemic failure by the jurisdiction of tax residence of the ultimate parent entity of that MNE Group to provide the CbC Reports in its possession and the Cyprus Tax Department has notified the Cypriot tax resident constituent entity that such a failure has occurred.

For example, a local filing obligation should still arise in Cyprus in respect of an MNE Group’s CbC report for Reporting Fiscal Year ending on 31 December 2019, even if a CbC Report has or will be submitted in the United States of America. Additionally, in the cases where notifications for reporting fiscal years starting on or after 1 January 2019 and before 1 January 2020 have been filed in Cyprus by Cypriot Constituent Entities of MNE Groups which are affected by this announcement, such notifications must be revised (if required) in accordance with this announcement.

If such notifications are revised by 31 December 2020, no penalties will be imposed for the Reporting Fiscal Year starting on or after 1 January 2019 and before 1 January 2020.

 

Contact Persons:

Marios Palesis
Partner – Tax Department
Marios.Palesis@kinanis.com

Christina Papaioannou
Supervisor 
tax@kinanis.com