Comparative Guides
Welcome to Mondaq Comparative Guides - your comparative global Q&A guide.
Our Comparative Guides provide an overview of some of the key points of law and practice and allow you to compare regulatory environments and laws across multiple jurisdictions.
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Results: 4 Answers
Corporate Tax
5.
Anti-avoidance
5.1
Are there anti-avoidance rules applicable to corporate taxpayers – if so, are these case law (jurisprudence) or statutory, or both?
 
Cyprus
While Cyprus has incorporated various anti-abuse rules into its tax laws, the general anti-avoidance rules are set out in the Income Tax Law as a result of the partial implementation of the EU Anti-Tax Avoidance Directive (expected to be fully implemented by 2020).

For more information about this answer please contact: Charles Savva from C.Savva & Associates Ltd
5.2
What are the main ‘general purpose’ anti-avoidance rules or regimes, based on either statute or cases?
 
Cyprus
The General Anti-Abuse Rules (GAAR), which are applicable as from 1 January 2019, state that transactions which are not carried out for valid commercial reasons will give rise to tax liabilities, which will be calculated in accordance with the Income Tax Law.

For more information about this answer please contact: Charles Savva from C.Savva & Associates Ltd
5.3
What are the major anti-avoidance tax rules (eg, controlled foreign companies, transfer pricing (including thin capitalisation), anti-hybrid rules, limitations on losses or interest deductions)?
 
Cyprus
Apart from the GAAR, the following specific rules apply:

  • Interest deductibility: The deductibility of interest expenses is limited to 30% of taxable income before interest, tax, depreciation and amortisation, subject to conditions; and
  • Controlled foreign company rules – the undistributed profits of a controlled foreign company (if a Cyprus company directly or indirectly controls 50% of the foreign entity and the foreign entity is located in a low-tax jurisdiction) which arise from non-genuine arrangements are added to the Cyprus tax resident’s tax base.

Upon full implementation of the EU Anti-Tax Avoidance Directive (expected to be fully implemented by 2020), Cyprus will also introduce the required exit taxation and hybrid mismatch provisions.

For more information about this answer please contact: Charles Savva from C.Savva & Associates Ltd
5.4
Is a ruling process available for specific corporate tax issues or desired domestic or cross-border tax treatments?
 
Cyprus
Yes, tax rulings may be obtained from the Cyprus Tax Department.

For more information about this answer please contact: Charles Savva from C.Savva & Associates Ltd
5.5
Is there a transfer pricing regime?
 
Cyprus
In accordance with Article 33 of the Income Tax Law, all related-party transactions should be carried out at arm’s length. As from 1 July 2017, the Cyprus tax authorities introduced, via a tax circular, specific transfer pricing rules which currently apply only to intra-group financing transactions – that is, where the Cyprus resident entity obtains loans (irrespective of the source) and advances these loans to a related party. In such cases, the profit margin earned by the Cyprus resident entity should be supported by a transfer pricing study.

The rules allow entities which have a purely intermediary function to avoid conducting a transfer pricing study if their post-tax return is at least 2% of the value of the assets.

It is expected that the transfer pricing rules will be extended to cover all related-party transactions by 2020.

For more information about this answer please contact: Charles Savva from C.Savva & Associates Ltd
5.6
Are there statutory limitation periods?
 
Cyprus
The statutory limitation period is six years.

For more information about this answer please contact: Charles Savva from C.Savva & Associates Ltd