Alignment of domestic law with EU directive on mandatory automatic exchange of tax information

The recently-enacted Law 33(I)/2018 amends the Law regarding Administrative Cooperation in the Field of Taxation of 2012 to 2017 to align domestic law with EU Directive 2016/881/EU, which amended EU Directive 2011/16/EU on administrative cooperation in the field of taxation.

The amending law replaces the definition of ‘automatic exchange’ contained in Article 2 of the principal law with the revised definition set out in Article 1 of EU Directive 2016/881/EU. It also adds a new Article 7C, which requires ultimate parent entities of multinational enterprises (MNEs) resident in Cyprus for tax purposes, and other reporting entities under Annex III of the law, to file country-by-country reports within 12 months of the end of each fiscal year. The first fiscal year for which a country-by-country report must be filed is that beginning on or after 1 January 2017.

The required format for a country-by-country report is set out in Annex III and comprises aggregate information for each jurisdiction in which the MNE group operates concerning its:

  • revenue;
  • pre-tax profit or loss;
  • income tax paid;
  • income tax accrued;
  • share capital;
  • accumulated earnings;
  • employees; and
  • tangible assets other than cash or cash equivalents;

together with an identification of each constituent entity of the MNE group stating:

  • its main activity;
  • the jurisdiction in which it is tax resident; and
  • the jurisdiction under whose laws it is organised if different than its tax residence.

As the competent authority under the law, the Cyprus Tax Department is required to notify its counterparts in other EU member states of any information relating to a constituent entity resident in another member state within 15 months from the end of the reporting period.

In addition, the new law introduces the other detailed technical amendments contained in the amended EU directive.

For further information on this matter please contact Elena Christodoulou or your usual contact at Elias Neocleous & Co LLC.