CYPRUS Law and Practice Contributed by: Stella Strati, Patrikios Legal
• accounting profits of no more than EUR750,000 and non-trading income of no more than EUR75,000; or • accounting profits of no more than 10% of its oper - ating costs for the tax period. In any case, the Cypriot controlling entity can claim credit for any foreign tax imposed on the CFC profits that are included in its tax base. 6.6 The Substance of Non-Local Affiliates No rules related to the substance of non-local affiliates apply in Cyprus. 6.7 The Sale of Shares in Non-Local Affiliates The definition of titles under Cyprus law includes shares, bonds, debentures, founders’ shares, and oth - er titles of companies or other legal persons incorpo - rated in Cyprus or abroad (and rights thereon). Cyprus law provides that the gains on the sale of shares in non-local affiliates will be exempt from any taxes in Cyprus.
Currently, the deadline for the submission of the income tax return for legal persons is 31 January of the year following the year after the year of assess - ment (eg, for 2026 the relevant deadline would be 31 January 2028). Furthermore, a Cyprus company is obliged to file its annual return with the Cyprus Registrar of Companies accompanied by the audited financial statements of the previous year. 9. BEPS 9.1 Adoption of BEPS Recommendations The commitment of Cyprus to follow the recommen - dations of the OECD/G20 Base Erosion and Profit Shifting Project (BEPS) is evident, given that it has already implemented various changes in line with the BEPS recommendations. As per BEPS Action 2: Neutralising the Effects of Hybrid Mismatch Arrangements, Cyprus has intro - duced hybrid mismatch rules (see 9.6 Hybrid Instru- ments and BEPS Implementation for further details). Furthermore, by implementing both the BEPS recom - mendations and the ATAD, Cyprus has introduced the CFC rule and the ILR. Pursuant to BEPS Action 5: Harmful Tax Practices, Cyprus has abolished the old IP box regime and has introduced new rules regarding tax benefits granted towards genuine IP activity, as per the nexus approach. In order to prevent the granting of treaty benefits in inappropriate circumstances, Cyprus has opted for the principal purpose test (see 9.9 Anti-Avoidance Rules for more details). Moreover, in light of the BEPS recommendations to prevent artificial avoidance of permanent establish - ment status, Cyprus has transposed all relevant new definitions into its legislation, including definitions of commissionaire and similar arrangements. Cyprus has also introduced transfer pricing rules, leg - islated country-by-country (CbC) reporting and signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit
7. Anti-Avoidance Provisions 7.1 Overarching Provisions
A general anti-abuse rule has applied since 1 Janu - ary 2019 and was introduced as part of the general implementation of the ATAD. This rule provides that non-genuine arrangements – the main purpose of which is to procure a tax advantage – are ignored. Such arrangements are considered to be “non-gen - uine”, as their mere existence does not reflect valid commercial reasons or economic reality.
8. Audit Cycles 8.1 Regular Routine Audit Cycle
Cyprus companies are obliged to submit an annual tax declaration, which is prepared based on audit - ed financial statements. Such financial statements should be audited and signed by a Cyprus-qualified and licensed auditor. A tax year is the same as a cal - endar year.
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