- Scope of Application:
The amendments apply to ultimate parent undertakings and standalone undertakings established under Cyprus law with consolidated or individual revenue exceeding €750 million for each of the last two consecutive financial years. It also extends to medium and large subsidiaries operating in Cyprus under foreign ultimate parent undertakings if those parents are outside the EU. These entities are now required to disclose key income tax information on a country-by-country basis.
- Country-by-Country Reporting (CbCR) Requirements:
The amendment mandates the preparation and public disclosure of a comprehensive income tax information report. This report should detail the following for each jurisdiction where the entity operates:
- Revenue (including related party transactions).
- Profit or loss before income tax.
- Income tax paid and accrued.
- Accumulated earnings.
- Number of employees.
- Nature of activities undertaken.
Reports must be submitted to the Registrar of Companies within 12 months following the financial year-end. Reports must also be made available free of charge to the public in a machine-readable format, in at least one official language of the EU, and remain accessible for a minimum of five years.
Under Section 157ΙΓ of the Companies Law, the members of the administrative, management, and supervisory bodies of ultimate parent undertakings or standalone entities bear collective responsibility for ensuring the preparation, publication, and public accessibility of income tax information reports.
Key responsibilities include:
- Compliance Assurance: Board members must ensure that the reports are prepared in accordance with the provisions outlined in Sections 157Γ to 157ΙΒ.
- Timely Submission: Reports must be filed within the stipulated timeline to avoid penalties.
- Accuracy and Transparency: Board members are required to verify the accuracy of the disclosed data, ensuring it reflects the financial reality and adheres to the legislative requirements.
For subsidiaries governed by Section 157Δ, similar collective responsibilities apply, emphasizing the importance of coordination between subsidiary boards and parent undertakings.
Section 157ΙΓ further specifies that any designated individuals tasked with publicity procedures under Section 347 for foreign entities must also act within the bounds of national law to ensure compliance.
- Exemptions:
While the law provides for a transparent framework, exemptions are possible. Entities operating solely within Cyprus or another EU Member State may be exempt from publishing their reports. Additionally, businesses may seek temporary exemptions to protect sensitive commercial information. However, any omissions must be clearly justified within the report, and all omitted data must eventually be disclosed within five years.
The primary goal of this legislative update is to promote fiscal transparency and combat tax avoidance by large multinational enterprises. By mandating public disclosure of tax-related information, the law seeks to enable scrutiny from civil society and foster trust in the tax compliance of businesses operating in Cyprus. These amendments underscore Cyprus’ commitment to adhering to EU transparency initiatives and global tax governance standards.
The content of this article is valid as at the date of its first publication. It is intended to provide a general guide to the subject matter and does not constitute legal advice. We recommend that you seek professional advice on your specific matter before acting on any information provided. For further information or advice, please contact Stephanos Ayiomamitis, Partner at our Limassol Office, Tel +357 25363685 or email stephanos.ayiomamitis@kyprianou.com.