Cyprus- Legislation implementing Anti-Tax Avoidance Directive is adopted
On 5 April 2019, the parliament adopted a law implementing the Anti-Tax Avoidance Directive (2016). Rules are applied from 1 January 2019.
(i) Interest deductibility limitation rule
The interest limitation rule limits the otherwise deductible exceeding borrowing costs up to 30% of EBITDA. Safe-harbour threshold is EUR 3 million. Exceeding borrowing costs may be carried forward to future tax years for up to 5 years.
(ii) CFC rule
The CFC rule provides that the undistributed income of a CFC resulting from non-genuine arrangements must be included and taxed at the level of the Cyprus controlling entity. An entity is regarded as a CFC if it is an exempt foreign permanent establishment (PE) or a foreign company in which a Cyprus tax resident company holds, directly or indirectly, more than 50% of the share capital, voting rights or profit distributions, and whose actual corporate tax burden is lower than 50% of the tax that would have been charged on the company or PE under the applicable Cyprus corporate tax system.
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