NEWS

The Cyprus Tax Department (CTD) has recently informed the Institute of Certified Public Accountants of Cyprus (ICPAC) via a letter dated 8^th February 2017, that as of 1^st July 2017 they will terminate the application of the pre-agreed minimum profit margins of 0.125% – 0.35% on qualifying intra-group back to back financing arrangements.

As specified in the letter issued by the CTD to ICPAC, from the above date onwards, all tax rulings confirming the applicability of the above profit margins on intra-group back to back financing arrangements will cease to be effective.

As of 1^st July 2017, intra-group back to back financing arrangements will have to be supported by Transfer Pricing (TP) Studies prepared by an independent expert and will have to be based on the relevant OECD standards.

The letter further notes that as from 1^st July 2017 all the relevant tax rulings that have already been issued or are going to be issued by 30^th June 2017 and which involve this type of transactions will cease to be applicable. In cases where the relevant intra-group financing arrangements remain in place after this date, the profit spreads will have to be supported by the relevant TP Studies.

The revised rules apply as from 1^st July 2017 and affect periods from 1^st July 2017 onwards.

 An update will be communicated as soon as the CTD issues further details on the application of the revised rules. 

We remain at your disposal to discuss with you the above developments and to evaluate how this may impact your current financing arrangements.