October 13, 2021
Cyprus Tax Authority issues clarification regarding Competent Authority Agreement with the United States for exchange of CbC reports
On 7 October 2021, the Cypriot Tax Department publicly announced that the bilateral Competent Authority Agreement (CAA) for the exchange of Country-by-Country (CbC) reports between Cyprus and the United States (US), which is still under negotiation, is expected to be effective for Reporting Fiscal Years (RFYs) starting on or after 1 January 2021.
Therefore, the secondary filing mechanism for a Cypriot Constituent Entity (CE) of a multinational enterprise group with a US tax resident Ultimate Parent Entity (UPE) will be triggered for RFYs starting on or after 1 January 2020, but before 1 January 2021.
Accordingly, a Cypriot CE whose UPE is a tax resident in the US, will have an obligation to proceed with the filing of the CbC report locally in Cyprus for its RFY ending on 31 December 2020, even if a CbC report has been or will be submitted in the US.
The Cypriot Tax Department has further noted that in cases where notifications have already been filed in Cyprus by Cypriot CEs for RFYs starting on or after 1 January 2020 and before 1 January 2021, such notifications must be revised accordingly if they are affected by the announcement. If such notifications are revised before 31 December 2021, no penalties will be imposed.
For additional information with respect to this Alert, please contact the following:
Ernst & Young Cyprus Limited, Limassol