On 1 November 2016, Cyprus signed the Multilateral Competent Authority Agreement (“MCAA”) on Country-by-Country Reporting (“CBCR”) joining other member states of the Organization of Economic Cooperation and Development (“OECD”), in their commitment to increase corporate accountability and transparency and ensuring that CbC reporting is implemented consistently across the globe.
Furthermore on 30 December 2016, the Cyprus Ministry of Finance has since issued a Decree in line with Article 6 (16) of Assessment and Collection of Taxes Law on Country by-Country Reporting (the Decree), to align the Assessment and Collection of Taxes Law with the requirements of the Council Directive (EU) 2016/881, designating the recommendations of the OECD BEPS Action Plan 13, on Country-by-Country Reporting (“CbCR”).
The Decree of 25 May 2016, being in line with the 2016/881 amending Directive 2011/16/EU with regards to mandatory automatic exchange of information in the field of taxationa European Union (EU), requires that all EU Member States are obligated to implement a CbCR in their national legislation, in accordance with the recommendations of the Organisation for Economic Co-operation and Development (OECD) Base Erosion and Profit Shifting (BEPS) Action 13 on CbCR.
In accordance with the Decree, as from 1 January 2016 a Cyprus tax resident company that is the ultimate parent company of a Multinational Enterprise Group (MNE Group) is required to submit a CbC report in its country of residency, providing the MNE Group annual consolidated group revenue exceeds or is equal to the allocated threshold of €750 million.
Alternatively, any other Cyprus tax resident entity that is not an ultimate parent entity of the MNE Group, may be appointed as the surrogate parent entity for CbCR purposes, providing.
Furthermore, a Cyprus tax resident entity that may not be the ultimate parent entity of an MNE Group, may be considered to be the surrogate parent entity for CbCR purposes providing the meet one of the following, and can submit the CbCR of the MNE Group in place of the ultimate parent entity:
- The ultimate parent entity is non-resident in Cyprus; or
- The ultimate parent entity is not obliged to file a CbCR in its country of residency; or
- If the ultimate parent entity’s country of tax residency has not effected an automatic exchange of information instrument with Cyprus,by way of CbCR; or
- If the ultimate parent entity’s country of tax residency, has been reported for systematic failure of exchanging information.
The CbC Report must include the following prior to its submission:
- Aggregate information relating to the amount of revenue, profit/(loss) exclusive of income tax, the income tax paid amount, the income tax accrued amount, the issued share capital, accumulated retained earnings (other than cash or cash equivalents), tangible assets and the number of employees relating to each jurisdiction in which the MNE Group operates; and
- Identification of every constituent entity of an MNE Group,the tax residence country and the nature of its primary business activities
This is the data that is required to be collected viaCbCR globally, as per the BEPS Action 13 Report and the EU Directive that is intended to be used all OECE and G20 countries committed to implementing minimum standards for CbC and forfor the purposes of assessing high-level transfer pricing risk assessments and other tax risks related to Base Erosion and Profit Shifting (BEPS).
Date of Submission and notification
Notification must be made to the Cyprus Tax Authority by the ultimate parent entity or the surrogate parent entity, at latest,on the last day of the reporting fiscal year of such MNE Group. The first notification will take place on the 20 October 2017, according to the extension date agreed.
Electronic submission of the relevant CbCR to the Cyprus Tax Authorities has to be actioned within 15 months as from the end of the reporting fiscal year. A further extension has been made to the submission of the first CbCR, relating to the fiscal year from 1 January till 31 December 2016, with the submission due date been extended to a 3 month period.
Administrative penalties of €100 may be levied for failure to comply with the CbCR submission requirements and deadlines. The penalty is anticipated to be amended in the early part of 2017.
The MNE Groups will need think further and take the necessary steps to ensure that they can collate and produce the necessary information required, developing internal processes and procedures that will enable them to capture the required information in an efficient and timely manner in compliance with the CbCR submission requirements and deadlines.