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The European Commission has referred Cyprus, along with Spain, Poland, and Portugal, to the European Court of Justice for failing to implement the 2022 directive on a global minimum level of taxation for multinational corporations and large companies (Pillar 2 directive).
This referral was part of the Commission's October infringement package, published on Thursday. The package also includes a separate infringement process against Cyprus for failing to comply with the EU directive on the recognition of professional qualifications, particularly for architects. Additionally, the Commission sent a reasoned opinion to Cyprus, the Czech Republic, and Portugal, urging them to comply with the Digital Services Act (DSA).
Infringement procedures are used by the Commission to address violations or incomplete implementation of EU law by member states. Most cases are resolved once countries comply, but the process can escalate to the European Court of Justice, which has the authority to impose sanctions.
The Commission referred Cyprus (INFR(2024)0020), Spain, Poland, and Portugal to the court for not incorporating the directive (EU) 2022/2523 into national law. The directive, adopted on December 15, 2022, aims to ensure a minimum level of taxation for multinational corporations and large domestic firms within the EU.
EU member states were required to implement the necessary laws by December 31, 2023. While most member states have complied, Cyprus, Spain, Poland, and Portugal have yet to notify the EU of their legislative changes, despite significant efforts by national authorities to finalize them. The Commission issued reasoned opinions to the four countries in May 2024.
The directive is part of Pillar 2 of the G20/OECD agreement on international tax reform, designed to limit competition over lowering corporate tax rates. Under Pillar 2, large multinational and domestic groups with annual revenues of at least €750 million will be subject to a minimum effective tax rate of 15%.
The Commission views the implementation of Pillar 2 rules as essential for reducing the risk of tax base erosion and profit shifting, ensuring that the largest multinational groups pay the agreed minimum corporate tax rate.
The Commission has also opened an infringement case against Cyprus [INFR(2024)4019] for non-compliance with the directive on the recognition of professional qualifications (Directive 2005/36/EC, amended by Directive 2013/55/EU), particularly affecting architects with acquired rights. These professionals face obstacles in joining the national registry, unlike others with Cyprus-issued qualifications, limiting their career opportunities.
Cyprus has two months to address the issues highlighted by the Commission, which may escalate the case if it does not receive a satisfactory response.
Finally, the Commission issued reasoned opinions to Cyprus [INFR(2024)2016], the Czech Republic, and Portugal for failing to fully implement the Digital Services Act. These countries have yet to empower their national digital services coordinators and establish penalties for DSA violations, despite having a February 17, 2024, deadline.
The countries now have two months to take the necessary steps, or the Commission may refer them to the European Court of Justice.
