SATURDAY, 25 NOV 2017

 

CONNECT

Facebook Linked In Twitter
PwC_13/11-28/11_728x90px
GloriaJeans_266x90px
IMH LTD

Syllouris and Zhang Reaffirm Cyprus - China Close Ties of Friendship

Anastasiades: A New Cyprus Effort Must Be Well Prepared

IMH LTD
MTN_07/07-10/04_468x60px

PROFESSIONAL SERVICES

brought to you by PWC

Cyprus Releases Long-Awaited Transfer Pricing Guidelines on Intra-Group Financing

Cyprus Releases Long-Awaited Transfer Pricing Guidelines on Intra-Group Financing

As of 1st July 2017, the tax treatment of intra-group financing arrangements has been amended in Cyprus.  Intra-group financing transactions refers to finance activities between related parties (as defined in Section 33 of the Income Tax Law), including permanent establishments in Cyprus. Based on the Interpretative Circular issued by the Cyprus Tax Department, intra-group financing arrangements must be taxed from 1st July 2017 onwards under the arm’s length principals (transfer pricing rules).

For the purposes of the transactions under the scope of the Circular issued, it must be determined for each intra-group transaction whether it complies with the arm’s length principles.  A comparability analysis must be performed in order to determine whether the transaction between independent entities is comparable to transactions between related entities.

The comparability analysis mentioned above should consist of the two following parts:

Identification of the commercial financial relationship between entities and determining the conditions and economically relevant circumstances attached to those relations in order to accurately delineate the controlled transaction.
Comparison of the accurately delineated conditions and economically relevant circumstances of the controlled transaction with those of the comparable transactions between independent entities.

It should be noted that the group financing company should be controlling the risk if it has the decision-making power to enter into a risk-bearing commercial relationship.  In order to justify the risk control and further validate that the management and control are exercised in Cyprus, it is essential that the group financing company has an actual presence in Cyprus.

In case of companies with a profile comparable to the entities subject to Regulation (EU) No 5/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) NO 64/2012, a return on equity of 10% after-tax can be observed in the market and be considered as reflecting arm’s length remuneration for the financing and treasure functions in question.

Simplified procedures exist, according to which the transactions of financing companies pursuing a purely intermediary activity are deemed to comply with the arm’s length principle if the company under review receives a minimum return of 2% after tax on assets.  In order to benefit from this simplification measure, the use of it should be communicated to the Tax Department.

The above mentioned percentages are valid as of the date of issuance of the Circular and will be reviewed by the Tax Department based on relevant market analysis and – if required - will be changed accordingly.

Minimum requirements for the transfer pricing analysis exist and are necessary in order for the analysis to be in compliance with the principles of the new circular.

Finally, any tax rulings relating to the matters of the Circular which were issued prior to 1st July 2017 will no longer be considered valid.

The above changes will have an immediate impact on all Cyprus financing companies with intra-group financing transactions and it is imperative that such structures are examined so as to ensure that their tax treatment is correct and their tax risk exposure is mitigated.

Eurofast’s transfer pricing team of professionals can assist you in evaluating the tax implication of the above changes on your structures.

MORE ON PROFESSIONAL SERVICES

KPMG Ignite Accelerates Strategies for Intelligent Automation and Growth

At its Global Data & Analytics (D&A) Summit in Boston, KPMG in the USA and KPMG ...

Professional Services Sector: A Step towards the New Economic Cycle

IMH and the Cyprus Fiduciary Association are organizing the Cyprus Professional Services ...

Andersen Global Announces Legal Services in Cyprus

Andersen Global has announced legal services in Cyprus through collaborating firm, ...

FROM AROUND GOLDNEWS

   

Reddy Reiterates New Zealand‘s Support towards Cyprus Settlement

New Zealand Governor-General Patsy Reddy has reiterated her country’s support to a settlement of the Cyprus problem, strongly commending the firm ...
   

Rahmon Stresses Need For Further Development of Ties with Cyprus

President of Tajikistan has stressed the need for further development of bilateral ties with Cyprus, especially in the fields of economy and tourism. President ...
   

Pamboridis Discusses the Cyprus NHS at CIBA Event

The Minister of Health, Dr. George Pamboridis accepted an invitation from the Cyprus International Businesses Association (CIBA), to inform the members ...
   

Juncker: Meeting with May Will Show If Brexit Progress Made

The president of the European Commission Jean-Claude Juncker said that a meeting with British Prime Minister Theresa May on December 4 will allow the EU to see ...
   

Multiyork Furnishing Collapse Puts 550 Jobs under Threat

The UK furniture retailer has gone into administration, putting 550 jobs under threat. The retailer will trade until Christmas at the earliest while ...
   

Kadis Highlights Need for Action to Promote Sustainable Development

Action needs to be taken, in order for the Education for Sustainable Development (ESD) to respond to the needs of the international community for social, ...
   

Pamboridis Performs Opening of HIV Checkpoint

In October, the Minister of Health George Pamboridis, on behalf of the President Nicos Anastasiades, performed the official opening of the first permanent HIV ...
   

Infocredit & LexisNexis Among Exhibitors at the 8th Annual AML and Financial Crime Conference

Infocredit Group and its strategic partner LexisNexis Risk Solutions were among the main exhibitors at the ACAMS 8th Annual AML and Financial Crime Conference ...
 

YOUR COMMENTS

HEADLINES

MOST POPULAR

KEBE_Awards_14/11-08/12_300x250px
Gold_Issue_300x250px

IMH LTD