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How the global minimum tax framework impacts Cyprus and how RSM can support your compliance journey.
What is the OECD Pillar Two framework?
The OECD Pillar II framework establishes a global minimum corporate tax rate of 15%, aimed at addressing tax base erosion and profit shifting by multinational enterprises (MNEs).
This initiative is part of the OECD's broader project on Base Erosion and Profit Shifting (BEPS), designed to ensure that large MNEs pay a fair share of taxes, regardless of where they operate. For Cyprus, this means significant changes to its tax landscape, requiring businesses to adapt their structures and strategies to comply with the new rules.
Under the Pillar II framework, MNEs with a consolidated annual revenue of €750 million or more are subject to the global minimum tax. For Cyprus, this is expected to impact organisations that have utilised the country's historically competitive low tax rates. Businesses must now re-evaluate their tax positions, ensuring compliance with the new regulations while exploring ways to minimise financial impacts. Understanding these changes is crucial for Cypriot enterprises to maintain a competitive edge while complying with international tax standards.
When do the new rules take effect in Cyprus?
The implementation of the OECD Pillar Two rules in Cyprus is closely aligned with the European Union's adoption of the Minimum Tax Directive (Council Directive (EU) 2022/2523). Cyprus introduced domestic legislation on December 18th, 2024, when the relevant Law was published in the Official Gazette of the Republic of Cyprus.
The OECD's Pillar Two framework comes into effect in Cyprus in two phases:
From 1 January 2024: The Qualified Income Inclusion Rule (QIIR).
From 1 January 2025: The Qualified Undertaxed Profits Rule (QUTPR) and Qualifying Domestic Minimum Top-Up Tax (QDMTT).
Who is impacted by Pillar Two in Cyprus?
The new Law concerns:
Domestic subsidiaries of MNEs Large-scale domestic groups
with annual consolidated revenues of at least €750 million in at least two of the four preceding financial years.
Both Cypriot-headquartered MNEs and foreign-headquartered MNEs with subsidiaries or branches in Cyprus fall within the scope, provided they meet the revenue threshold.
What actions should organisations take now?
If your business is affected, taking proactive steps now can mitigate risk and keep you ahead of the changes.
- Assess your organisation’s exposure to Pillar Two rules.
- Review and enhance your financial reporting systems to meet new compliance requirements.
- Collaborate with experienced tax advisors to develop strategies for minimising your tax burden.
- Stay informed about ongoing regulatory updates in your jurisdiction.
Why choose RSM for Pillar Two compliance?
RSM stands out as a trusted adviser for businesses navigating the complexities of the OECD Pillar Two rules in Cyprus and abroad. With extensive experience in both local and international tax frameworks, RSM combines a global perspective with a deep understanding of the Cypriot regulatory environment. This enables RSM professionals to provide clients with tailored, practical, and proactive compliance solutions that meet their specific needs.
- Proactive solutions to minimise financial risks.
- Expert guidance on new tax regulations.
- Customised strategies to align with your business objectives.
- Localised expertise combined with the global network of RSM professionals.
Get Pillar Two ready with RSM in Cyprus
The introduction of the Pillar Two framework marks a pivotal change for many organisations operating in Cyprus. While the new rules bring added complexity, RSM is dedicated to guiding clients smoothly through every stage of this global reform. By combining technical expertise with a practical approach, RSM ensures that businesses are not only compliant but also well-positioned to benefit from informed and timely decision-making.
With RSM's support, middle market organisations in Cyprus can proactively adapt to these changes, implement best practices, and seize opportunities for optimisation brought about by the evolving international tax environment.
Whether you are newly in scope or managing complex multinational operations, RSM is ready to provide expert guidance that shapes your Pillar Two strategy for success.
