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Changes anticipated on acceptable profit margins
Taxand Cyprus discuss the changes on acceptable profit margins between related companies.
The Cyprus Tax Authorities, taking into consideration the International developments (OECD/G20 initiative – BEPS) have decided to proceed with the alteration of the current tax regime in relation to profit margins on loans between related parties.
Specifically, it is expected that as of 1 July 2017, all loans between Cyprus Tax Resident Companies and their related companies, will now have to be supported by Transfer Pricing Studies. These will have to be prepared by independent experts and be based on the OECD principals. This new rule will affect all the financial transactions between related companies for both tax assessment purposes and for the issuance of tax rulings.
In addition, all tax rulings which have been issued up to 30 June 2017 in relation to this subject will become void.
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