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Cyprus has consented to the Pillar Two Transitional CbCR Safe Harbour. In addition, the Cyprus Parliament recently voted to amend Article 9(1)(d) of the Cyprus Income Tax Law, which grants a tax deduction for expenditures incurred for scientific research and R&D. Finally, the Ministry of Finance announced that the Cyprus-Netherlands tax treaty will be effective 1 January, 2024.

Actions to consider: By consenting to the Pillar Two Transitional CbCR Safe Harbour, new and existing Cyprus companies of Pillar Two-eligible US multinational enterprises (MNEs) may not be impacted by the Pillar Two rules until after 2026. Also, eligible Cyprus intangible property (IP) companies should consider the 120% R&D ‘super-deduction,’ as this provision can apply to any type of IP developed via a cost sharing agreement. Finally, Cyprus taxpayers with existing and prospective Dutch entities in their structures should analyze the provisions of the soon-to-be-effective Cyprus-Netherlands tax treaty.