Cyprus Pillar Two bill proposes qualified domestic top-up tax

Bill 23.01.067.166-2026, submitted to the House of Representatives, would amend Cyprus’s Global Minimum Tax Law, Law 151(I)/2024. Its central proposal is a new qualified domestic minimum top-up tax (QDMTT) regime. The document is a bill for parliamentary consideration, rather than an enacted amendment.^[1][2]

Groups in scope

The existing law’s scope covers multinational and large domestic groups with consolidated annual revenue of at least €750 million in at least two of the four preceding fiscal years. Its minimum rate is a 15% effective tax rate under the Pillar Two calculation rules, rather than a replacement nominal corporate tax rate. The bill seeks closer alignment with Council Directive (EU) 2022/2523 and the OECD framework.^[1][3]

Separate rules for 2025 and 2026

Clause 4 would insert article 12A for the new domestic regime. Clauses 14–15 would limit existing article 12 to fiscal years starting on or after 31 December 2024 but before 31 December 2025, and apply article 12A to years starting on or after 31 December 2025. For calendar-year groups, that preserves the existing CyDMTT for 2025 and introduces the proposed QDMTT for 2026. Other corrective amendments have earlier fiscal-year application dates under proposed article 62.^[1][3]

Domestic tax priority

New article 12A would cover Cyprus constituent entities, joint ventures and their affiliates, and minority-owned constituent entities, subject to exclusions including investment and insurance investment entities. Separate effective-rate and top-up-tax calculations would apply to the specified joint-venture and minority-owned categories. The domestic rules would apply before a qualified income inclusion rule (IIR) or undertaxed profits rule (UTPR). The Ministry’s stated objective is to secure Cyprus’s priority in collecting top-up tax on domestic activities; proposing a qualified regime does not itself establish OECD recognition.^[1]

Calculation and reporting changes

Calculation details matter: foreign controlled-foreign-company taxes would not be allocated to Cyprus entities for QDMTT purposes. Article 12A(4) would permit an agreed assignment of domestic tax liability between eligible Cyprus entities in the same group, with liability reverting if the recipient misses payment. Articles 45, 48 and 49 would be updated for reporting, assessment and payment, including local information-return filing where the necessary third-country competent-authority agreement is absent and use of the DAC9 template under Directive (EU) 2025/872.^[1]

What MNE groups should assess

For MNE tax teams, the proposed distinction means 2025 and 2026 domestic calculations should be assessed separately, including entity classification, foreign-tax allocations and filing arrangements. Any implementation decision needs to follow the bill’s parliamentary progress and the applicable international qualification process, alongside the provision-specific transition rules.^[1][3]