Cyprus has recently enacted important tax measures that restrict
the deductibility of certain expenses involving entities
established in jurisdictions considered
“non-cooperative” or “low tax.” These
amendments bring Cyprus in line with broader EU initiatives and
reflect the country's increasing focus on transparency and
compliance with international tax standards.
Scope of the New Rules
The restrictions apply to expenses incurred by Cyprus
tax-resident companies and permanent establishments that make
direct or indirect payments to related or unrelated entities
resident, incorporated, or otherwise operating in either of the
following categories. First, non-cooperative jurisdictions, which
are jurisdictions listed on the EU blacklist of non-cooperative
jurisdictions for tax purposes. The EU updates this list twice a
year, and it includes countries that fail to meet minimum tax
governance standards or that engage in harmful tax practices.
Second, low-tax
