The Cyprus Tax Department has revised the simplification rates for certain related-party financing arrangements and introduced a new reporting requirement. The changes apply from tax year 2026.
Revised simplification rates
- Debt-funded financing where the Cyprus company does not control the relevant risks and lacks the financial capacity to assume them: minimum return reduced from 2.50% to 0.50%
- Other qualifying debt-funded financing arrangements: minimum return of 2.00%
- Equity-funded financing: minimum return of the relevant 10-year government bond yield plus 2.25%
- Related-party financing received and used in the business: maximum borrowing cost of the 10-year Cyprus government bond yield plus 1.75%
- The 5% mark-up for low value-adding services remains unchanged.
New Financing Transactions Table
Taxpayers required to prepare a Cyprus Local File for financing transactions must also submit a Financing Transactions Table through Tax For All with the Summary Information Table.
The requirement applies where total controlled financing transactions exceed, or would exceed on an arm’s length basis, the €10 million category threshold. The table mainly covers intercompany loans and other financing-type receivables and payables. Explicit financial guarantees and cash-pooling arrangements are excluded under the published guidance.
Recommended action
Taxpayers with related-party financing should review their arrangements and confirm whether the €10 million threshold is met. Agreements, accounting records, transfer pricing documentation and the new table should be consistent.
How Andersen can assist
Andersen can assist with reviewing financing arrangements, applying the revised rates, preparing or reviewing transfer pricing documentation and completing the new Financing Transactions Table.