Implications Of Anti-Avoidance Amendments To EU Parent-Subsidiary Directive

Background

Cyprus transposed the EU Parent-Subsidiary Directive¹ into domestic legislation when it updated its tax laws in preparation for EU membership in 2004. The Income Tax Law and the Special Contribution for the Defence of the Republic Law provide a liberal system of double taxation avoidance, which also extends to non-EU countries, as the tax laws treat all non-residents of Cyprus in the same way.

The EU Council of Economic and Finance Ministers (ECOFIN) announced in June 2014 that it had reached political agreement for the modification of the directive in order to stem what it sees as overaggressive tax avoidance techniques. Draft legislation has yet to be published, but it is prudent for users of Cyprus holding and finance structures to review their current arrangements now in order to understand the potential impact of any proposed measures and to plan accordingly.