Tax Update: Clarification on Bilateral Agreement between Cyprus and the United States

The Cyprus Tax Department informed all legal entities and their representatives on the 5th October 2023 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 2023.

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 2022 and before 1 January 2023.

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 2022, 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 2022 and before 1 January 2023 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 2023, no penalties will be imposed for the Reporting Fiscal Year starting on or after 1 January 2022 and before 1 January 2023.

Contact

Tax Department
tax@kinanis.com 

OUR COMPANY

We are a Law Firm with offices in Cyprus consisting of more than 50 lawyers, accountants and other professionals, consulting international and local clients.

The Firm and its predecessors offer to their clients legal and advisory services since 1983. The Firm gradually evolved over the years, from one traditional law Firm into an innovative pioneering Law Firm that combines exceptional expertise in corporate law, trusts, taxation, VAT, accounting, litigation, financial services, labour law, migration and technology.

Since its establishment, the focus of the Firm has been largely oriented towards corporate businesses and always compatible with the latest global developments and innovations.

Drawing from the team of our experienced professionals, we provide to the clients' businesses our full legal, tax and accounting support on a daily basis as well as tailored solutions to today's global economic and legal challenges. Our Firm is constantly harmonizing and adapting to technological developments by providing a corresponding support to its customers.

It is our policy to anticipate and prevent any issues that may arise and impact our clients' businesses and offer effective advice, timely and proactive solutions.

We participate in the operations of our customers and have as our vision and pride to become part of their story having as flag, the motto "...Being part of their story is our pride..."

Kinanis LLC
Limited Liability Law Firm
Egypt 12, 1097 – Nicosia
Tel: 22 558 888 – Fax: 22 662 500
E-mail: KinanisLLC@kinanis.com – Website: www.kinanis.com