The minimum tax rate is set at 15%. It applies to large multinational companies with annual revenues of at least €750 million. OECD rules for fair competition are being followed.

The Republic of Cyprus risks being referred to the Court of Justice of the European Union and facing a fine for failing to comply with the directive on introducing a minimum level of taxation for multinational corporations.

Cyprus is required to implement the directive under the agreement for the OECD and G20 global tax reform. The minimum tax rate is 15%, targeting large multinational companies with annual revenues of €750 million.

Cyprus has informed the EU that the related bill for the directive's transposition has passed the legal review by the Legal Service and, after approval by the Council of Ministers, will be submitted to Parliament for a vote. The bill will be retroactive, with the new rate for these specific multinational companies calculated from the beginning of the current year.

As explained by responsible sources, "The OECD developed a set of international tax rules to ensure that multinational corporations pay a fair share of taxes wherever they operate. The reform aims to set a minimum threshold for competition regarding corporate income tax rates by establishing a global minimum level of taxation."

They further explained that "by eliminating a significant portion of the advantages of profit shifting to zero or very low tax jurisdictions, the reform for establishing a global minimum tax will ensure a level playing field for businesses worldwide and allow jurisdictions to better protect their tax bases."

In its report to the European Council on tax matters, approved on December 7, 2021, it reaffirmed its support for the global minimum tax reform and committed to its swift implementation through Union law. Member states are obligated to effectively implement their commitment and achieve a minimum global level of taxation.

This framework creates a system of two interrelated rules, also jointly referred to as GloBE Rules. According to these rules:

First, an additional tax should be levied whenever the effective tax rate of a multinational company in a particular jurisdiction is lower than 15%.

Second, in such cases, the jurisdiction is considered to be subject to low taxation.

The two rules concern the inclusion of income (IIR rule) and the profits subject to reduced taxation (UTPR rule). Additionally, the directive should apply to large-scale domestic groups to avoid the risk of discrimination between cross-border and domestic cases.

The directive should apply only to entities established in the Union that are members of multinational or large-scale domestic groups and meet the annual consolidated revenue threshold of at least €750 million.

The directive came into force in 2022, and the deadline for its transposition into national law by the member states was set for December 31, 2023, at the latest.