In accordance with relevant notification by the Cyprus Tax
Department, there will be a termination of the current tax practice
in relation to the minimum acceptable margins on loans granted to
related parties. This decision comes as a result of the Tax
Department taking into consideration the International
developments (OECD/G20 initiative – BEPS).
Based on the announcement, the existing practice with the
minimum acceptable margins will apply up to 30th June 2017, and
from 1st July 2017 any loan transactions between related parties
should satisfy the arm's length principle and be based on
current market conditions.
It is noted that the current acceptable practices as to what was
considered by the Tax Department as the minimum acceptable interest
rate margin on intra group back to back loans, as supported by the
circular released by the Tax Department in 2011) is as follows:
