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ARTICLE · 18 JUNE 2019

Response To EU Anti-Tax Avoidance Directive

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On 5 April 2019 the House of Representatives approved legislation implementing the EU Anti-tax Avoidance Directive (2016/1164/EC) in Cyprus with the aim of improving the resilience of the internal market against cross-border tax avoidance practices.

CyprusTax
Elena Christodoulou
Elena Christodoulou
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Introduction

On 5 April 2019 the House of Representatives approved legislation implementing the EU Anti-tax Avoidance Directive (2016/1164/EC) in Cyprus with the aim of improving the resilience of the internal market against cross-border tax avoidance practices.

The provisions relating to interest deductibility, controlled foreign company (CFC) rules and the general anti-abuse rules (GAARs) came into effect on 1 January 2019, while the provisions relating to exit taxation and countering hybrid mismatches are expected to be introduced after 2020.

Interest deductibility

Rules on interest deductibility aim at limiting the possibility of deducting interest which is now set at 30% of taxable income before interest, taxes, depreciation and amortisation (EBITDA). Taxable EBITDA is defined as the total of net taxable income calculated in accordance with Cypriot income tax laws increased by the exceeding borrowing costs. However, the 30% restriction does not apply for

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