header_menu_icon
Sol Dikey Reklam Alanı Genişlik: 160px Yükseklik: 600px
Sağ Dikey Reklam Alanı Genişlik: 160px Yükseklik: 600px
ANASAYFA arrow right GÜNDEM arrow right Cyprus must find ‘golden ratio’ with new minimum tax rate
Cyprus must find ‘golden ratio’ with new minimum tax rate
Partner and head of international tax services at advisory and consulting firm PwC Cyprus Stelios Violaris recently examined the adoption of the minimum tax rate of 15 per cent, outlining the implications and prospects f...
YAYINLAMA: 06 Ocak 2023 / 11.54 |GÜNCELLEME: 29 Mart 2023 / 19.34

Partner and head of international tax services at advisory and consulting firm PwC Cyprus Stelios Violaris recently examined the adoption of the minimum tax rate of 15 per cent, outlining the implications and prospects for Cyprus.

The European Commission announced in December that it has officially adopted the application of a minimum tax rate throughout its territory starting in 2024. This gives member states just one year for the relevant European Directive to be turned into domestic legislation, without exception, meaning that Cyprus must also follow suit.

At the international level, the agreement had already been reached by October 2021, having been accepted by around 140 OECD member countries. Therefore, it was only a matter of time before EU member states would agree to fully adopt the directive, despite the initial objections by a handful of countries, including Poland and Hungary.

This new reality, Violaris explained, only affects multinational and domestic groups with a total annual turnover of at least 750 million euros, based on their consolidated financial statements. Groups of such size will pay the additional tax where the effective tax rate on their book profits in each separate jurisdiction is below 15 per cent.

“The impact of imposing this additional tax of up to 15 per cent on accounting instead of taxable profits is huge since in many jurisdictions accounting profits are much higher than taxable profits due to several tax exemptions and deductions they offer,” Violaris said.

“Cyprus is, of course, such a jurisdiction and therefore companies based in our country and belonging to such groups by having their parent company here or abroad, whether in the EU or in other third countries, are inevitably subject to this increased tax on their profits,” he added, noting that “the general rule works by imposing the additional tax on the ultimate parent company, which pays this tax to its own tax authority for all its group companies, worldwide”.

However, Violaris noted, based on the European Directive that has been passed and in order to preserve the sovereignty of EU member states, each country can choose to apply the directive at the domestic level for companies based in its own jurisdiction and therefore for this additional tax to be collected by the member state itself.

“The question that naturally arises is how Cyprus will possibly be affected by this new situation and whether there are such companies in Cyprus that belong to global giant groups,” Violaris stated.

“We at PwC Cyprus conducted our own internal study some months ago, the result of which demonstrates that the number of such companies based in Cyprus is indeed reasonably high,” he elaborated, adding that “the annual taxes paid by these companies in the Republic of Cyprus are quite significant in terms of the total taxes collected by our state on corporate profits”.

Consequently, the tax specialist explained, the impact of the implementation of these new rules should be assessed thoroughly, responsibly and immediately.

“The bet for us as a centre of international activities is, on the one hand, to fully harmonise with the European Directive and at the same time somehow manage to remain competitive,” he said.

“Our goal should not be simply to find ways to retain foreign corporate investors, who have so far trusted Cyprus, but also to turn this new challenge into an opportunity to attract even more foreign investors,” Violaris added.

What is more, Violaris cautioned that these important taxes collected by the state “may well more than double or even lost altogether if Cyprus cannot find the golden ratio” in how this new directive is applied or affected by other pieces of legislation.

“What is important, in our opinion, is to react as soon as possible and certainly earlier than the other member states and third countries with a similar profile to us,” Violaris concluded.

 

YORUMUNUZU YAZIN, TARTIŞMAYA KATILIN!
Yorumlar
* Bu içerik ile ilgili yorum yok, ilk yorumu siz yazın, tartışalım *