Executive summary

On 26 June 2026, the Cyprus Minister of Finance issued a Decree (the Decree) pursuant to Article 60(b) of the Cyprus Pillar Two legislation (Law 151(I)/2024) (the Law). The Decree adopts, for purposes of interpreting and applying the Law, additional administrative guidance documents issued by the Organisation for Economic Co-operation and Development (OECD) and confirms the entry-into-force dates of the safe harbors included in the OECD Side-by-Side (SbS) package. The Decree was published in the Official Gazette of the Republic of Cyprus on 26 June 2026.

Section 33 of the Law provides the legal basis for the application of safe harbors in Cyprus. Given that all EU Member States are members of the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS) and have consented to the SbS agreement, the safe harbors included in the SbS package should be legally effective in Cyprus as of their respective entry-into-force dates, without the need for further legislative amendments.

Separately, on 29 May 2026, the European Commission published a Frequently Asked Question (FAQ) on the Pillar Two Directive confirming that all EU Member States should treat Cyprus as having a qualified Income Inclusion Rule (IIR) in effect for fiscal years commencing on or after 31 December 2023. This confirmation is relevant for multinational enterprise groups (MNE Groups) considering central filing in Cyprus and for groups assessing the treatment of the Cypriot IIR within the broader Pillar Two framework.

OECD documents adopted under the Decree

The Decree adopts the following OECD documents for purposes of interpreting and applying the Law:

• OECD (2025), "Tax Challenges Arising from the Digitalisation of the Economy — Administrative Guidance on Article 9.1 of the Global Anti-Base Erosion Model Rules," OECD/G20 Inclusive Framework on BEPS, OECD, Paris, published on 15 January 2025
• OECD (2025), "Tax Challenges Arising from the Digitalisation of the Economy — Administrative Guidance on Article 8.1.4 and 8.1.5 of the Global Anti-Base Erosion Model Rules (January 2025)," OECD/G20 Inclusive Framework on BEPS, OECD, Paris, published on 15 January 2025
• OECD (2025), "Tax Challenges Arising from the Digitalisation of the Economy — GloBE Information Return (January 2025)," Inclusive Framework on BEPS, OECD/G20 Base Erosion and Profit Shifting Project, OECD Publishing, Paris, published on 15 January 2025
• OECD (2025), "Tax Challenges Arising from the Digitalisation of the Economy — Consolidated Commentary to the Global Anti-Base Erosion Model Rules (2025)," Inclusive Framework on BEPS, OECD/G20 Base Erosion and Profit Shifting Project, OECD Publishing, Paris, published on 9 May 2025
• OECD (2025), "Tax Challenges Arising from the Digitalisation of the Economy — Global Anti-Base Erosion Model Rules (Pillar Two) Examples," OECD, Paris, published on 9 May 2025
• OECD (2026), "Tax Challenges Arising from the Digitalisation of the Economy — Global Anti-Base Erosion Model Rules (Pillar Two) Side-by-Side package," OECD, Paris, published on 5 January 2026.

Entry into force of the Side-by-Side package safe harbors

The Decree confirms the following entry-into-force dates for the safe harbors included in the SbS package:

• The Simplified Effective Tax Rate (ETR) Safe Harbour applies for fiscal years beginning on or after 31 December 2025.
• The extension of the Transitional Country-by-Country Reporting (CbCR) Safe Harbour applies for fiscal years beginning on or before 31 December 2027, excluding any fiscal year ending after 30 June 2029.
• The Substance-based Tax Incentive Safe Harbour applies for fiscal years beginning on or after 1 January 2026.
• The Side-by-Side Safe Harbour applies for fiscal years beginning on or after 1 January 2026, or the following year, as set out in the Central Record maintained by the OECD listing the jurisdictions that apply the safe harbor rules and their respective entry-into-force dates.
• The Ultimate Parent Entity (UPE) Safe Harbour applies for fiscal years beginning on or after 1 January 2026.

(For background, see EY Global Tax Alert, OECD releases Side-by-Side Package on Pillar Two Global Minimum Tax: Detailed review, dated 16 January 2026).

Status of the Cypriot IIR under EU law

The European Commission's 29 May 2026 FAQ on the Pillar Two Directive addresses how the Cypriot IIR should be treated within the European Union for fiscal years for which filing is due before Cyprus appears on the OECD Central Record of legislation.

The European Commission clarified that, for purposes of and in accordance with the Pillar Two Directive, the qualified status of the Cypriot is directly derived from Article 3(18) of the Directive for fiscal years commencing on or after 31 December 2023. Therefore, all EU Member States should treat Cyprus as having a qualified IIR in effect.

The FAQ further confirms that Cyprus can receive top-up tax information returns as of 31 May 2026 and is committed and obliged under EU law to exchange information under the EU Directive on Administrative Cooperation (DAC9) with other Member States in time for the first exchange deadline. If an MNE opts to file its top-up tax information return centrally in Cyprus, other Member States should not require domestic filing at that time in line with DAC9.

Implications

The Decree provides clarity regarding the application of the Law in Cyprus, as well as legal certainty regarding the interpretation of the Law and the entry-into-force dates of the safe harbors included in the SbS package.

MNE Groups with a Cypriot UPE or Cypriot constituent entities should assess how the Decree affects their Pillar Two position, including safe-harbor eligibility under the SbS package.

Separately, the European Commission's 29 May 2026 FAQ confirms for EU Member States that Cyprus should be treated as having a qualified IIR in effect. MNE Groups operating in non-EU jurisdictions should nevertheless consider whether the treatment of the Cypriot IIR needs to be separately supported under the domestic qualification rules of those jurisdictions.