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The EU Code of Conduct Group (Business Taxation) (the Group) on November 20, 2020 issued a report in which the Cyprus notional interest deduction (NID) regime was assessed as ‘not harmful’ as of its January 1, 2015 introduction.  The EU Economic and Financial Affairs Council (ECOFIN) approved the report on November 27, 2020.  Furthermore, as indicated in its official December 11, 2020 report, the OECD’s Global Forum on Transparency and Exchange of Information for Tax Purposes (the Global Forum) found that Cyprus’ overall rating remains ‘largely compliant.’

In the meantime, the Cyprus Council of Ministers recently approved the Cyprus draft budgetary plan for 2021 (2021 Draft Budget).  The 2021 Draft Budget reiterates Cyprus’ commitment and willingness to cooperate in all appropriate forums for taxation, with respect to the respective competencies under treaties and in light of relevant voting procedures that apply to such matters.  Furthermore, Cyprus announced new unilateral measures to address ‘aggressive tax planning.’

In light of the Group’s assessment, taxpayers may wish to consider measures to further benefit under the NID regime.  Also, taxpayers should monitor additional clarification and developments under the 2021 Draft Budget in order to evaluate the potential impact to their existing and planned structures, as well as their business.