Cyprus caught between US multinationals and Brussels over minimum tax law

Economy euEuropean UniontaxTop Newsus Cyprus caught between US multinationals and Brussels over minimum tax law Cyprus Caught Between Us Multinationals And Brussels Over Minimum Tax Law Relevant News Trump suggests renaming Strait of Hormuz after himself amid Iran war 3 September 2026 Cyprus caught between US multinationals and Brussels over minimum tax law 3 September 2026 Door-to-door mosquito checks expand as West Nile virus cases climb 3 September 2026 Eleftheria Paizanou 3 September 2026 FacebookXWhatsAppEmailPrintViber Cyprus faces a difficult choice after the European Commission issued strong recommendations to revise its legislation imposing a minimum tax rate on multinational corporate groups under the EU’s Pillar Two rules. On one side, there is a visible risk that American-owned multinationals could leave Cyprus for tax jurisdictions exempted until 2029 from imposing the 15 per cent effective minimum tax rate on entities belonging to multinational groups or large-scale domestic groups with annual revenue of 750 million euros. On the other, there is concern over possible sanctions if the country fails to comply with the Commission’s strict recommendations. Provisions of the 2024 law The relevant legislation was approved in December 2024, when Cyprus adopted a supplementary domestic tax, a step it considered within its discretion under EU harmonisation guidance. Under the 2024 law, the national top-up tax applies from 2025, giving affected Cypriot entities time to adjust and reducing the risk that they would relocate to countries offering greater tax benefits. Business groups operating in Cyprus that pay an effective tax rate below the 15 per cent minimum are required, under that law, to pay the difference as a supplementary tax. Brussels was not satisfied with the law as passed, considering that it particularly favoured the parent companies of American-owned multinationals. It demanded Cyprus apply a Qualified Domestic Minimum Top-up Tax, known as QDMTT. Meeting at the Ministry of Finance A new bill adopting the Commission’s recommendations has been in public consultation since late July. It provides for a Qualified Domestic Minimum Top-up Tax to take effect from January 1, 2026. The amending bill also includes, beyond the changes requested by the European Commission, additional amendments aligned with OECD guidelines and recommendations, ahead of Cyprus’s assessment in autumn 2026, when its national legislative framework will be reviewed for compliance with internationally agreed Pillar Two rules. The public consultation was originally due to close on September 5, but was extended to September 7 because of the issue’s complexity. According to Phileleftheros information, a meeting was held at the Ministry of Finance a few days ago, attended by technocrats and professional bodies, to discuss the matter. Malta, Estonia and others Some local professional bodies raised concerns that, under the new arrangements the amended law would create, American multinationals operating in Cyprus would face a heavier tax burden and could shift to other countries exempted from Pillar Two rules, such as Malta, Estonia, Latvia and Lithuania. Those countries received an exemption in 2023, since under the EU directive, member states hosting fewer than 12 subsidiaries of multinational groups meeting the 750 million euro threshold were entitled to request a delay in applying the rules until 2029. During the Ministry of Finance meeting, some professional bodies said American companies make a substantial contribution to state coffers, paying around 140 million euros in taxes. Limited changes Ministry of Finance technocrats told the bodies involved that there is little room to change the draft bill, since Brussels is being particularly strict in demanding implementation of the domestic top-up tax. They warned that Cyprus could face trouble if it fails to comply. The technocrats said the aim is for the bill to be approved by Cabinet as soon as possible and voted through Parliament within October. There is also strong discussion that the matter is fundamentally a political issue between the United States and the EU, with Cyprus caught in the middle of that dispute. The mistakes According to private sources, mistakes were made from the outset in how the matter was handled. They say this stems from the Ministry of Finance’s failure to submit clear data on the number of multinationals affected. Parliament was initially told 60 companies would be liable for the tax; that figure later rose to 1,900. At the time, the Ministry of Finance had said the multinationals in question would bring Cyprus revenue of between 200 million and 250 million euros through taxation. The wording of the bill was also changed in 2024 without informing the bodies involved, while the relevant authorities learned about the QDMTT issue from the EU only after the fact. 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