Cyprus ratifies the Multilateral Instrument

On 22 January 2020, the Instrument of Ratification of the Multilateral Convention to Implement Tax Treaty Related Matters to Prevent Base Erosion and Profit Shifting (more widely known as the Multilateral Instrument) was published in the Official Gazette of the Republic of Cyprus, together with the Cyprus Definitive List of Reservations and Notifications (known as the MLI Cyprus Position) and the Explanatory Statement.

The purpose of the Multilateral Convention is to automatically and swiftly amend existing Double Tax Treaties (DTTs), providing uniformity and coherence.

With a decision of the Council of Ministers on 5 April 2017, Cyprus approved the incorporation of Action 6 (Purpose of Covered Tax Agreement), Action 7 (Treaty Abuse) and Action 14 (Making Dispute Resolution Mechanisms More Effective) in order to ensure compliance with the minimum actions of the BEPS Framework. Cyprus has elected to cover all of its existing DTTs through the Multilateral Convention, except where the application of minimum standards has been agreed bilaterally.

The Multilateral Convention will apply to DTTs in which Cyprus is a party, provided that the other Contracting State has also ratified the convention. For what concerns withholding taxes, the Multilateral Convention is applicable as from the first day of the calendar year following the year of ratification. In the case of Cyprus it will be applicable as from 1 January 2021.

As per the Multilateral Convention the effective date is the first day of the month following the next three months from submission of the Instrument of Ratification. OECD confirmed receipt of the instrument and other documents from Cyprus on 23 January 2020, so the effective date of the convention will be 1 May 2020.


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