DON’T Hang On The EU’Rope
Latest News (courtesy of Saava Cyprus Law)
Cyprus is stepping up to align its domestic tax framework with international standards, lest they be kicked out of the “club” from banking and offshore structure allowance. On April 10, 2025, the House of Representatives (Cyprus) approved a series of tax amendments designed to curb tax avoidance, particularly through transactions involving low-tax jurisdictions (LTJs) and EU blacklisted jurisdictions (BLJs).
These measures will have far-reaching implications for businesses and investors leveraging Cyprus’ tax advantages. As of now, millions of businesses and individuals across Europe have elected to use Cyprus, Malta, Bulgaria and Portugal as a legal tax reducing method.
Key Changes in Cyprus Tax Legislation
Withholding Taxes on Outbound Payments:
- Effective April 16, 2025, a 17% withholding tax (Special Defence Contribution) applies to dividends and interest paid to companies based in EU blacklisted jurisdictions.
- Starting January 1, 2026, these rules expand to cover LTJs, defined as jurisdictions with a corporate tax rate less than 50% of Cyprus’ 12.5% rate (or future 15% rate if reforms are implemented).
- A 10% withholding tax will apply to royalties paid to LTJs from January 2026.
Before, the net effect of being stationed in Cyprus was that foreign income would be treated as zero percent tax–but the changes would mean that only “accepted” offshore structures would be permitted to enjoy these foreign-tax exemptions.
Non-Deductibility of Certain Payments:
- Interest and royalty payments to associated entities in LTJs will no longer be tax-deductible for Cyprus corporate tax purposes, effective January 1, 2026. This targets structures where payments are routed to low-tax jurisdictions to reduce Cyprus tax liabilities.
Again, more of the same. A constricting of where individuals and businesses are able to run their operations. The EU is doing their best to trap the wealth within their borders.
General Anti-Abuse Rule (GAAR):
- Cyprus has introduced a GAAR to disregard artificial arrangements lacking commercial substance. This aligns with OECD and EU directives and reflects a broader crackdown on aggressive tax planning.
These changes have significant consequences for huge operations as they now have to:
- Corporate Groups with structures involving LTJs or BLJs must review their payment flows and holding structures to identify exposure to withholding tax.
- Tax Advisors need to reassess intercompany loans, licensing agreements, and management service arrangements that might trigger non-deductibility or withholding taxes, depending on the jurisdictions they are dealing with.
- Substance is Critical: The introduction of GAAR means companies must ensure their arrangements are defensible based on genuine business reasons, not solely tax advantages. Ultimately this means more expenses and legal costs.
Number 2
Bulgaria is roped into more destruction regulation simultaneously with protesting the adoption of the Euro DigitalEuro CBDC.
The EU MiCA Regulation (Regulation (EU) 2023/1114) establishes a harmonized framework for crypto-assets across the EU. Each Member State must adopt national measures to implement it effectively. Legislative Status Bulgaria adopted the national MiCA implementation law on June 20, 2025 with full oversight by its financial commission and the Central Bank of Bulgaria.
This change was published in the State Gazette and enters into force in early July 2025. Existing providers may operate without a MiCA license until July 1, 2026. However, there are sanctions for non-compliance beyond this point which are heavy: Up to €15 million or 15% of annual turnover for non-compliance.
Number 3 (in place)
EU Green Deal and the Recovery and Resilience Facility (RRF), member states face growing pressure to implement environmental taxes; a long with everything else.
The EU-mandated green taxes aim to:
- Discourage overuse of natural resources (e.g., water consumption).
- Reduce carbon emissions from fossil fuel consumption (fuel levies).
- Generate funds for environmental and climate-related initiatives.
These measures are integral to the EU’s commitment to a so-called climate-neutral economy by 2050. However, the timing and scope of implementation are left to each member state, creating room for negotiation, but this is slowly changing given the EU’s ability to use lawfare against their constituent states.
Please note that they are wishing to limit the basic element required for life, reduce energy consumption which is economic output that translates to financial security and wealth and misdirect funds towards non-sensical operations instead of supportive items like infrastructure, medicine or debt repayment.
Closing
The EU knows it’s bankrupt 10X over and is in a process of using legal means of trapping their own citizens’ wealth within the borders. Their main methods of doing this lately has been new legislation surrounding digital assets, the eradication of cash and ensuring that tax rates paid are from entities that are not on their “naughty list” that comes and goes. For a business owner, it may be simpler and even cheaper to pay more tax locally in Europe than it would be to demonstrate compliance to these increasingly strenuous rulings.
In the big picture, new entrepreneurs, investors, venture capitalists and start ups see the writing on the wall and will do everything they can to leave or avoid the European Union. Of course, you and I know that this will backfire and there will be less taxes brought in (as wealth leaves and less production leads to less taxation), but the psychopaths in Brussels are going full speed ahead regardless. I would be very skeptical at overallocating to the Union right now, and I’m tempted personally to explore the Eastern Bloc countries further.
If you want to discuss your own personal situation, your options for lifestyle, tax-setup, business incorporations and learning about the “on-the-ground” situations throughout the world, namely Latin America, please contact Open Door Consultancy LLC and we can set up a call–>Only $50 [or we can offer a $36 Report Form after accessing your big picture circumstances]. My goal is to offer some guidance, teaching and advice for you to fulfill your plan.
