Cyprus has endorsed its full support for safe harbour rules. That refers to the Pillar 2 Side-by-Side (SbS) arrangement as allowed by EU Directive 0222/2523.
The Cyprus Minister of Finance stated on 8 January 2026 that the SbS arrangement for the Pillar 2 global minimum tax was recently endorsed by the BEPS Inclusive Framework.
The release highlights that, under Council Directive (EU) 2022/2523 of 14 December 2022, safe harbour provisions, such as those in the SbS agreement, can be applied if all EU Member States agree. Cyprus has confirmed its full support and consent to these safe harbour rules.
The Republic of Cyprus has consistently supported the OECD/G20 Base Erosion and Profit Shifting (BEPS) actions and the work undertaken by the OECD/G20 and the Inclusive Framework on BEPS in the field of international taxation.
Cyprus is not a member of the OECD due to political considerations and is therefore unable to participate directly in consultations at the OECD level. Cyprus has nevertheless expressed its support for the outcomes of this work.
The OECD/G20 Inclusive Framework on BEPS issued a statement in October 2021 that set out the fundamental principles for developing the modalities of Pillar 1 & Pillar 2. It was welcomed by the Ministry of Finance through a ministerial press release published in early October 2021.
Article 32 of Council Directive (EU) 2022/2523 of 14 December 2022 on ensuring a global minimum level of taxation for multinational enterprise groups in the Union (Pillar 2) provides for the application of safe harbour rules. However, this article states that all European Union (EU) member states must have given consent in order for an international set of rules and conditions to be a qualifying international agreement on safe harbours.
Accordingly, pursuant to Article 32 of the Pillar 2 Directive, the Republic of Cyprus provides its full assurance and consent to the following document and the safe harbour rules outlined therein: OECD/G20 Base Erosion and Profit Shifting Project on Tax Challenges Arising from the digitalisation of the economy – Global Anti-Base Erosion Model Rules (Pillar 2), Side-by-Side Package, approved by the OECD/G20 Inclusive Framework on BEPS of 5 January 2026. In particular, the Side-by-Side Safe Harbour, the UPE Safe Harbour, the simplified ETR Safe Harbour, the extension of the Transitional CbCR Safe Harbour, and the Subsistence-Based Tax Incentives Safe Harbour.
