Cyprus – along other 67 countries and jurisdictions – formally signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI) on 7 June 2017 in Paris. Taxand Cyprus discusses the signing.
The MLI will implement a series of tax treaty measures to update the existing network of bilateral tax treaties and reduce opportunities for tax avoidance by multinational enterprises. Another 8 counties or jurisdictions have expressed their intent to sign the MLI as it remains open for additional signatories.
The first modifications to bilateral tax treaties are expected to enter into effect in early 2018.
It is important to note that, according to OECD representatives, the MLI will not be amending the bilateral tax treaties by changing or adding particular words or phrases, but will rather be used in conjunction and will modify existing treaties to which it has application.
Upon signing the MLI, each country had the right to list the treaties to which the MLI will apply. Below is the list of Cyprus’ Reservations and Notifications at the time of signature.
The main expected impact on Cypriot companies will be the result of Articles 6 and 7 which relate specifically to treaty abuse.
It is essential that Cyprus companies’ owners examine the impact that these changes will have on their structures, as failure to do so could lead to significant tax implications.