Cyprus Consults on Amendments to its QDMTT

Cyprus has opened a public consultation on amendments to its Pillar Two legislation intended to address observations from the European Commission and align the domestic rules more closely with OECD guidance. The consultation opened on 30 July 2026 and is scheduled to close on 5 September 2026.

Cyprus already has a domestic minimum top-up tax. Article 12 of Law 151(I)/2024 introduced the domestic Cyprus top-up tax, and Article 61(2) applies it to financial years beginning on or after 31 December 2024. The draft legislation intends to reform and replace the existing regime for later years, rather than introducing a Cyprus DMTT for the first time.

Existing domestic minimum top-up tax

Article 12(1)(a) of Law 151(I)/2024 provides that low-taxed constituent entities and joint ventures located in Cyprus are subject to a domestic Cyprus top-up tax. The tax applies before a qualified income inclusion rule or undertaxed profits rule. The amount payable is generally the jurisdictional top-up tax calculated under Article 28, with the joint-venture calculation made under Article 37.

The current tax is therefore already a substantive DMTT. Article 61(2) provides that Article 12(1), together with the UTPR provisions in Articles 13 to 15, applies to financial years beginning on or after 31 December 2024. For a group using a calendar financial year, the first relevant period will normally be the year beginning 1 January 2025.

The existing law contains several features associated with the OECD QDMTT design. The tax is calculated on the full Cyprus jurisdictional top-up tax without reducing the amount by reference to a parent entity’s ownership interest. The de minimis exclusion in Article 31 and the safe-harbour rules in Article 33 may be applied by analogy. Article 12 also imports the initial-phase exclusion in Article 55 and permits the liability of one Cyprus group entity to be assigned, in whole or in part, to another Cyprus group entity with the receiving entity’s consent. If the receiving entity does not pay by the statutory deadline, liability returns to the original entity.

New Article 12A and the two-period structure

The draft bill would delete Article 12(3) and insert a new Article 12A entitled ‘Application of the qualified domestic Cyprus top-up tax’. The transitional amendment to Article 61 would establish two distinct regimes:

-Existing Article 12 would continue to apply to financial years beginning on or after 31 December 2024 but before 31 December 2025.

-New Article 12A would apply to financial years beginning on or after 31 December 2025. For calendar-year groups, this means the financial year beginning 1 January 2026.

The proposed legislation therefore restates the Cyprus DMTT regime prospectively through an expressly qualified and more detailed legislative framework.

Scope of the proposed QDMTT