Cyprus opens consultation on minimum tax changes for large business groups

Nicosia, Cyprus. Cyprus has opened a public consultation on proposed changes to its minimum tax rules for large multinational and domestic business groups. The consultation, which runs until September 5, 2026, concerns amendments to legislation implementing the global minimum tax framework known as Pillar Two.

EU alignment

The proposed amendments are intended to bring Cyprus’ national legislation fully into line with EU and international requirements.

They follow observations made by the European Commission during its review of Cyprus’ incorporation of the relevant EU rules into domestic law.

The legislation implements the EU directive on ensuring a global minimum level of taxation for multinational enterprises and large domestic groups, including amendments introduced by a further EU directive adopted on December 14, 2023.

Pillar Two framework

Under the Pillar Two system, large multinational and domestic groups with annual revenue exceeding €750 million are required to face a minimum effective tax rate of 15 per cent.

The framework aims to prevent large companies from reducing their overall tax liabilities by shifting profits to countries or territories with very low or zero tax rates.

Domestic top-up tax

The proposed changes would introduce a qualified domestic minimum top-up tax, known as QDMTT, from January 1, 2026.

The mechanism would allow Cyprus to collect additional tax required to raise the effective tax rate of qualifying businesses operating in the country to the 15 per cent minimum, rather than having that tax collected elsewhere.

The domestic top-up tax would apply to qualifying entities belonging to multinational groups or large domestic groups based in Cyprus. It would also cover certain joint ventures and companies linked to joint ventures, as well as certain partly owned entities based in Cyprus.