On 1st November 2016, Cyprus signed and became part of the Multilateral Competent Authority Agreement (“MCAA”) on Country-by-Country Reporting (“CBCR”) with other member states of the Organization of Economic Cooperation and Development (“OECD”).
Following that, on 30th December 2016, the Cyprus Ministry of Finance issued a Decree pursuant to Article 6(16) of the Assessment and Collection of Taxes Law on CBCR. This Decree is in accordance with Action 13 of the OECD Base Erosion and Profit Shifting (“BEPS”) and related EU Directive requiring all EU Member States to implement such CBCR in their domestic legislation.
In brief, with effect from 1st January 2016, all Cyprus tax resident entities that are ultimate parent entities of a Multinational Enterprises (MNE) Group with a consolidated group annual revenue €750 million and above, are required to make a relevant reporting on revenues, earnings, profits, taxes paid, taxes accrued, capital, tangible assets and number of employees on a by country basis.
Same obligation applies if the ultimate parent entity of a Cyprus entity is a non-Cyprus resident that is not obliged to file a CBCR report in its country of residence or even if obliged to prepare such CBCR report there is no exchange of information arrangement in place between that country and Cyprus, or that other country is notified as systematically failing to exchange information. In such case, the Cyprus entity is appointed as the surrogate parent entity with the same CBCR reporting obligations as if it were the ultimate parent entity.
Furthermore, all Cyprus constituent companies of MNE Groups should notify the Cyprus tax authorities with the identification of their Ultimate Parent Entity. Such notifications must be filed not later than the last day of the reporting fiscal year of such MNE group. For 2016, being the first notification, the deadline has been extended until 20 October 2017.
As such, implicated Cyprus entities of such Groups must put in place relevant mechanisms and procedures to be able to identify and make relevant reportings for CBCR purposes.
At the moment, there is an administrative penalty for failing to comply with CBCR at €100; but this is expected to be amended in 2017.