Cyprus Tax Authorities have announced the intention that minimum margin scheme for Group financing will be abolished on 1 July 2017. Current regime was regulated according to the correspondence between the commissioner of Tax Department and the Taxation Committee of ICPAC dated 4 July 2011. According to the current legislation, minimum accepted margins for intra-group financing range between 0.125% — 0.35%
Withdrawal of the current Back-to-Back profit margin scheme was a result of the international tax developments (OECD/G20 initiative – BEPS). Tax Department have announced that profit margins after 1 July 2017 must be supported by Transfer Pricing Studies which need to be based on the OECD transfer pricing guidelines.
This will affect those Companies that are using the group financing back to back scheme but on the positive site it will enhance the Tax transparency of the Company and will slightly affect, if at all, the effective tax payable.
Yiallourides & Partners Limited is at your disposal for consultation on existing arrangements and structures as well as to prepare the necessary Transfer Pricing study.