As of 1 July 2017, companies carrying out intra-group financing activities (“back-to-back”) in Cyprus, must follow the new Transfer Pricing Framework issued in the form of a Circular (interpretative Circular 3 issued on 30 June 2017) by the Cyprus Tax Department and which replaces the Minimum Margin Scheme regime which was applicable until 30 June 2017.
The Circular provides additional guidance in terms of substance and transfer pricing requirements in line with the Organisation for Economic Co-operation and Developments (OECD) guidelines, as well as guidance as to the required content of a Transfer Pricing Study (TPS).
As a result, the new Transfer Pricing Framework for intra-group financing companies introduced by the new Circular impacts existing and future financing structures in Cyprus.