T&L D-briefs - May 2026
T&L D-briefs is a bi-monthly tax and legal update, through articles, videos and other sources, all bundled together in a newsletter.
In this issue, we:
- share the list of low-tax jurisdictions (LTJs) as per the Tax Authorities for 2026
- summarise the latest OECD Pillar Two Common Understanding on penalty relief for GIR non- exchange
- highlight Cyprus’ introduction of a new foreign direct investment (FDI) screening framework
- outline the key amendments to the Cyprus VAT Law affecting the supply and renovation of immovable properties
Tax Developments
International Tax Developments
The Cyprus Tax Authorities publish the list of low-tax jurisdictions (LTJs) for 2026
On 9 April 2026, the Cyprus Tax Authorities published the list of jurisdictions that are considered as “low-tax”, for the purposes of applying the following two measures which are effective from 1 January 2026:
- A 5% withholding tax on dividends paid to related companies established in LTJs.
- The non-deductibility of interest and/or royalty payments to related companies established in LTJs.
The low tax jurisdictions for 2026 are:
- Anguilla
- Bahamas
- Bahrain
- Bermuda
- British Virgin Islands (BVI)
- Cayman Islands
- Guernsey
- Isle of Man
- Jersey
- Turks and Caicos Islands
- Vanuatu
The low-tax jurisdictions are determined based on specific criteria, and the list will be updated on an annual basis.
Upcoming local Pillar Two compliance deadlines
As per the Cyprus Pillar Two Law (“the Law”), several Pillar Two compliance obligations apply with respect to the Cyprus Constituent Entities (“CEs”) of calendar-year MNE groups subject to Pillar Two in fiscal year 2024. In specific, we would like to remind you that the 30th of June 2026 is the submission deadline for the following local Pillar Two filing obligations:
- the GloBE Information Return (“GIR”) – the Law provides for a central filing and dissemination approach, designed to enable an MNE group to file its annual GIR with a single tax authority, which then exchanges the relevant GIR information with all other relevant tax authorities based on the available activated exchange of information mechanisms (e.g., GIR Multilateral Competent Authority Agreement – “MCAA”, DAC9).
On 18 May 2026, the OECD, while considering that some exchange relationships may not be activated until 30 June 2026, published a “common understanding” among implementing jurisdictions to address compliance challenges that could otherwise arise from any potential delays in the availability of activated exchange relationships before the filing deadline by introducing relief from penalties and additional compliance obligations. See Deloitte | tax@hand for further details on the “common understanding”.
Cyprus is not a member of the OECD inclusive framework (for reasons unrelated to tax) and is therefore not a party to the published “common understanding”, while it has not yet issued any official announcement endorsing it. In addition, Cyprus has not yet signed and activated the GIR MCAA, neither transposed in its domestic legislation the provisions of the DAC9. Therefore, a local filing of the GIR may be required in those cases where the GIR will be filed in another jurisdiction.
- the one-off notification (registration) – aims to inform the Cyprus Tax Authorities (“CTA”) of certain basic information regarding the group, the Ultimate Parent Entity (“UPE”) and its jurisdiction, the Cyprus Constituent Entity(-ies), the fiscal year under reporting, etc.
- the annual GIR notification, where required – intends to update the CTA of the group’s Constituent Entity (usually the UPE) that will be filing the GIR and its jurisdiction.
In addition, we would like to remind you that the 30th of July 2026 is the submission deadline for the Cyprus Constituent Entities of calendar-year MNE groups subject to Pillar Two in fiscal year 2024 that have an obligation to prepare and submit a local IIR top-up tax due return in order to report and pay any top-up tax liability to the CTA.
In view of the fact that the Pillar Two compliance forms and / or any procedural guidance have not been published by the CTA yet, we will keep you updated through a dedicated tax alert once the forms will be released.
Cyprus introduces a new FDI Screening Framework
Cyprus has implemented Law 194(I)/2025, establishing a comprehensive Foreign Direct Investment (FDI) Screening Framework, effective from 2 April 2026. This mandatory regime aligns Cyprus with EU standards, requiring pre-approval for foreign investments in strategically sensitive sectors. Designed to safeguard national security and public order, the framework targets critical infrastructure, advanced technologies and sensitive activities, while preserving Cyprus’ investor-friendly environment. Foreign investors must navigate clear notification and compliance requirements, with significant penalties for non-compliance. This publication outlines the key elements of the new FDI screening process, highlighting strategic considerations and practical steps for investors and advisors.
For more details, read the full article here.
Clea Evagorou
Partner, Risk, Regulatory & Forensic Leader
Amendments to the Cyprus VAT Law related to the supply and renovation of immovable properties
On 27 February 2026, Cyprus introduced amendments to its VAT Law concerning the supply of “new properties” and the renovation of old properties. Effective from 1 September 2026, these changes include new definitions of "first occupation" and "first use" of buildings, which are crucial in determining when a building is deemed "new" for VAT purposes. These amendments affect immovable property transactions, specifying when VAT should be accounted for, and influence eligibility for the applicable reduced VAT rate.
For an overview of these amendments, click here.
Christos Papamarkides
Partner, Indirect Tax
Christakis Economou
Director, Indirect Tax
Margarita Stavri
Manager, Indirect Tax
Archive
The previous T&L D-briefs are available below.
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