Cyprus Formally Signs Multilateral Instrument On Base Erosion And Profit Shifting

EN
Elias Neocleous & Co LLC

Contributor

Elias Neocleous & Co LLC is the largest law firm in Cyprus and a leading firm in the South-East Mediterranean region, with a network of offices across Cyprus (Limassol, Nicosia, Paphos), Belgium (Brussels), Czech Republic (Prague), Romania (Budapest) and Ukraine (Kiev). A dynamic team of lawyers and legal experts deliver strategic legal solutions to clients operating in key industries across Europe, Asia, the Middle East, India, USA, South America, and China. The firm is renowned for its expertise and jurisdictional knowledge across a broad spectrum of practice areas, spanning all major transactional and market disciplines, while also managing the largest and most challenging cross-border assignments. It is a premier practice of choice for leading Cypriot banks and financial institutions, preeminent foreign commercial and development banks, multinational corporations, global technology firms, international law firms, private equity funds, credit agencies, and asset managers.
This will effectively introduce a principal purpose test and limitation of benefits provisions into all covered agreements.
Cyprus Tax
To print this article, all you need is to be registered or login on Mondaq.com.

On June 7 2017 Cyprus was among the first 68 jurisdictions to formally sign the Multilateral Convention to Implement Tax Treaty-Related Measures to Prevent Base Erosion and Profit Shifting in Paris.

The multilateral instrument will apply alongside existing double tax treaties and modify their application in order to implement the relevant base erosion and profit sharing (BEPS) measures, without requiring any further bilateral negotiations between the countries concerned. It will automatically amend existing double tax treaties between the signatory countries and introduce measures to prevent BEPS, including anti-abuse and anti-avoidance clauses.

When signing the multilateral instrument, each jurisdiction submitted a list of double tax agreements that it intended to be covered, together with a preliminary list of reservations and notifications in respect of the various provisions of the multilateral instrument. Cyprus intends to include all of its existing double tax agreements as 'covered agreements' falling within the scope of the multilateral instrument. While it has reserved the right for certain detailed technical provisions of the multilateral instrument not to apply, the key provisions ‒ particularly Articles 6 and 7 relating to treaty abuse ‒ will apply. This will effectively introduce a principal purpose test and limitation of benefits provisions into all covered agreements.

In order to qualify for the benefits of Cyprus's covered double tax treaties once the multilateral instrument is fully implemented, companies must therefore demonstrate real economic substance in Cyprus. As the effects of the multilateral instrument are likely to be felt in 2019 (in some cases, possibly sooner) early attention to the issue is advisable.

Originally published in International Law Office

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.

See More Popular Content From

Mondaq uses cookies on this website. By using our website you agree to our use of cookies as set out in our Privacy Policy.

Learn More