The Cyprus Parliament voted on 5 April 2019 the first implementation law in Cyprus of the EU AntiTaxAvoidance Directive (ATAD) and specifically on the following areas:
- Controlled Foreign Company (CFC) rule –effective date 01 January 2019
- (Net) Interest limitation rule –effective date 01 January 2019
- General Anti-Abuse rule (GAAR) –effective date 01 January 2019
- Exit taxation provisions –effective date 01 January 2020
- Hybrid mismatch rules –effective date 01 January 2020(exception: certain reverse hybrid mismatch provisions -01 January 2022)
The first ATAD implementation law will enter into force once it is published in the Cyprus Government Gazette with an effective date as from 1 January 2019.
The ATAD implementation law impacts only Cyprus corporate income tax taxpayers (Cyprus CIT taxpayers) and more precisely:
- Cyprus Tax Resident Companies, and
- Cyprus Permanent Establishments (PEs) of non-Cyprus tax resident companies
Controlled Foreign Company (CFC) Rule
The relevant CFC article in the ATAD allows Member States to choose between two options.
The first option is generally applicable to passive income of a CFC (OptionA) while the second option is applicable to income arising from "non-genuine arrangements" (OptionB), also referred to as the significant people functions approach. Cyprus adopted OptionB.
The CFC rules apply to both Cypriot tax resident companies and non-Cypriot tax resident companies which have a permanent establishment (PE) in Cyprus.
To see the full article click here
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.