Marios Yenagrites on 15% minimum tax for multinationals: “Its impact needs to be carefully assessed”

Marios Yenagrites, Tax Manager at Totalserve Group, said the impact from the introduction of a 15% minimum tax for multinationals must be carefully assessed to ensure that any positive impact on revenues is not offset by a potential exit of multinational enterprise (MNE) groups from Cyprus.

On 12 December 2024, the Cyprus Parliament voted into Law the EU Directive commonly known as Pillar Two, introducing a 15% global minimum level of taxation only for multinational enterprise (MNE) groups and large domestic groups in the EU with annual consolidated revenues exceeding €750 million.

As noted by Marios Yenagrites, Tax Manager at Totalserve Group, the Law introduces an Income Inclusion Rule (IRR) for financial years commencing from 31 December 2023, as well as a Domestic Minimum Top-Up Tax (DMTT) and an Undertaxed Profit Rule (UTPR) for financial years commencing from 31 December 2024.

“What it means in practice is that large business groups operating in Cyprus, falling within the provisions of the Law and paying actual tax at a rate lower than the 15% minimum effective tax, will be required to pay the difference by way of a supplementary tax,” he explained, adding: “At this point I deem necessary to highlight that this minimum level of taxation has been introduced by the majority of the EU member states and that those that have not done so yet are expected to introduce it in the near future.”

The long-awaited enactment of the Law achieves harmonisation of Cyprus with the EU regulations. “Its impact needs to be carefully assessed, as any positive effect in state revenues could be negated by a potential exit of MNE groups out of Cyprus,” Yenagrites said. “It remains to be seen whether any compensatory measures will be taken, in an effort to prevent relocations of affected MNE groups to other jurisdictions.”