The Ministry of Finance has opened consultation on a bill that inserts a Qualified Domestic Minimum Top-Up Tax into Cyprus law, taxing low-taxed group members here first.
The Ministry of Finance has opened public consultation on a bill that writes a Qualified Domestic Minimum Top-Up Tax directly into Cyprus's Pillar Two legislation, so that top-up tax owed by low-taxed Cyprus group members is collected by the Cyprus Tax Department rather than by another state applying the Income Inclusion Rule or the Undertaxed Profits Rule. The consultation opened on 30 July 2026. Nothing has been enacted yet, and the bill still has to pass through the House of Representatives, but the direction is settled enough that in-scope groups should not wait for enactment to start their review.
What the bill changes
The bill amends the Global Minimum Level of Taxation Law of 2024, Law 151(I)/2024, which transposed EU Council Directive (EU) 2022/2523 of 14 December 2022 on ensuring a global minimum level of taxation for multinational enterprise groups and large-scale domestic groups in the Union.
Its centrepiece is a new Article 12A, inserted immediately after the existing Article 12, headed "Application of the Qualified Domestic Minimum Top-Up Tax." It applies the QDMTT to three categories of entity established in Cyprus under Article 5 of the 2024 law: constituent entities of an in-scope multinational or large domestic group, joint ventures and joint venture subsidiaries, and minority-owned constituent entities. Investment entities, insurance investment entities, and entities excluded under Article 4(3) fall outside it.
The domestic top-up tax is applied before any Income Inclusion Rule or Undertaxed Profits Rule would otherwise apply to the same profits. Where a Cyprus-established parent entity would owe top-up tax calculated under Article 28, that liability is reduced, potentially to nil, by the amount of domestic top-up tax already paid by itself or by its constituent entities, so the same profits are not taxed twice under the two mechanisms.
The domestic top-up tax is applied before the Income Inclusion Rule or the Undertaxed Profits Rule would otherwise reach the same profits.
Two mechanical points affect how groups will manage the new tax in practice. First, where a group's functional currency is not the euro, the entity submitting the return may elect, for a renewable five-year period, to calculate the domestic top-up tax in the group's presentation currency or in euro. Second, a constituent entity, joint venture or joint venture subsidiary that owes the domestic top-up tax may assign the liability, wholly or in part, to another Cyprus group member, but only with that member's consent, and the obligation reverts to the assigning entity if the receiving entity misses the payment deadline in Article 48(3).
The bill also amends Article 45 on the Top-up Tax Information Return, aligning the standard reporting template with EU Council Directive (EU) 2025/872 of 14 April 2025 amending Directive 2011/16/EU on administrative cooperation in taxation, and requiring a filing under the OECD's "dissemination approach" where the Republic has no competent authority agreement in force with a third country in which certain group entities are located.
When it takes effect
The bill also rewrites the commencement provision in Article 61(2). On the amended wording, the existing Article 12 domestic top-up mechanism continues to apply to financial years beginning on or after 31 December 2024 and before 31 December 2025, while the new Article 12A applies to financial years beginning on or after 31 December 2025.
What this means in practice
Groups with Cyprus constituent entities that are in scope of Pillar Two should treat this as the point to start reviewing their position, not wait for the bill to pass. The practical effect of Article 12A is that low-taxed Cyprus entities will generate a Cyprus tax bill first, ahead of any top-up collected abroad under the Income Inclusion Rule or the Undertaxed Profits Rule, which changes where within a group structure the cash cost of the minimum tax actually lands.
Finance and tax teams should identify which Cyprus entities fall within the three categories the new Article 12A reaches, work out whether their group's functional currency election needs revisiting before the five-year window locks in, and decide in advance which group member will be asked to pay if an allocation election between Cyprus entities is going to be used, since that requires the receiving entity's consent and carries a real deadline under Article 48(3). Groups already filing a Top-up Tax Information Return should also expect the standard template to change to match the EU's 2025 administrative cooperation directive.
Questions we are asked
Has the domestic top-up tax become law?
Not yet. The Ministry of Finance, through its Tax Policy Unit, opened public consultation on 30 July 2026 on a bill amending the Global Minimum Level of Taxation Law of 2024, Law 151(I)/2024, which itself transposed EU Council Directive (EU) 2022/2523 of 14 December 2022. Nothing has been enacted, but groups with Cyprus constituent entities should start reviewing their Pillar Two position now.
What does the new Article 12A actually do?
It applies a Qualified Domestic Minimum Top-Up Tax, known as a QDMTT, to constituent entities, joint ventures and joint venture subsidiaries, and minority-owned constituent entities established in Cyprus that belong to an in-scope multinational group or a large-scale domestic group. Investment entities, insurance investment entities and entities excluded under Article 4(3) of the 2024 law remain outside it. The domestic top-up tax applies before any Income Inclusion Rule or Undertaxed Profits Rule would otherwise reach the same profits, so Cyprus keeps the taxing right rather than ceding it to another jurisdiction.
From when does it apply?
The bill sets separate windows. The existing Article 12 domestic top-up mechanism continues to apply for financial years beginning on or after 31 December 2024 and before 31 December 2025. The new Article 12A applies for financial years beginning on or after 31 December 2025.
Can group companies split the bill between them?
Yes. A constituent entity, joint venture or joint venture subsidiary that owes the domestic top-up tax may, by election, assign the liability wholly or partly to another constituent entity of the same group located in Cyprus, but only with that entity's consent. If the receiving entity does not pay within the deadline set by Article 48(3), the obligation reverts to the entity that made the election.
What happens if the tax is not paid?
Where the domestic top-up tax for a financial year remains unpaid four financial years after it fell due, the unpaid amount is folded into the jurisdictional top-up tax calculated under Article 28(3) instead, and Cyprus loses the ability to collect it through the domestic route.
Sources
- Public consultation, Global Minimum Level of Taxation of Groups of Multinational Enterprises and Large-Scale Domestic Groups in the Union (Amendment) Law of 2026, Ministry of Finance, Tax Policy Unit
- Draft bill amending the Global Minimum Level of Taxation Law of 2024, Law 151(I)/2024
This article is provided for general information purposes only and does not constitute legal advice.
Klitos Platis
Advocate, Partner
Kleanthous & Platis LLC, Nicosia · Published 10 September 2026
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