Profit margins on back to back loans

Profit margins on back to back loans

On February 2017, the Cyprus tax department (CTD) notified the Institute of Chartered Accountants (ICPAC) regarding the minimum margins on back to back loans transactions that CTD used to accept.

As per the said notification, the existing regime (with the minimum margin requirements) will be abolished from 01/07/2017 onwards.

This decision was taken due to the international tax developments (OECD/G20 initiative – BEPS) and as well the review of the regime under Business Code of Conduct and under a state aid perspective.

From 2017 onwards these transactions need to be supported by Transfer Pricing Studies, to be prepared by independent professionals based on OECD guidelines.

From 01/07/2017 any tax rulings issued based on previous regime will cease to be applicable. Any back to back loans remaining in place after 01/07/2017 need to be supported by Transfer Pricing Studies.