ARTICLE
16 November 2011

Intra Group Loans (Back-To-Back Loans) Through Cyprus

SP
Soteris Pittas & Co LLC

Contributor

Soteris Pittas & Co LLC logo
SOTERIS PITTAS & CO LLC is a boutique law firm, in size only, focusing on the areas of law related to business activity and dedicated to providing its clients with outstanding, highly personalized, legal representation
Cyprus Companies are in wide use as major vehicles in international tax structuring mainly due to the broad range of legal and tax related benefits they can offer because of the flexible tax system and the extended network of double tax treaties between Cyprus and other countries.
Cyprus Wealth Management
To print this article, all you need is to be registered or login on Mondaq.com.

Cyprus Companies are in wide use as major vehicles in international tax structuring mainly due to the broad range of legal and tax related benefits they can offer because of the flexible tax system and the extended network of double tax treaties between Cyprus and other countries. In this respect, there are certain advantages that have made Cyprus also a favorable financing company jurisdiction.

Thus, the use of Cyprus to "locate" the Financing Company of an international tax structure reduces the tax implications which are further reinforced by the clarifications of the Director of the Inland Revenue Department of June 2011 on the definition of minimum / maximum interest margin.

Under the Cypriot tax law, an exemption is given from the 10% defense contribution fund arising from interest received provided that this interest derives from or is closely connected to the ordinary course of business of the company.

The Director of the Cyprus Inland Revenue Department has determined the minimum acceptable profit margins on the so-called "back-to back" intra group loans. The Director has set the minimum interest between 0,125% - 0,35%, applicable as from the year 2008 and onwards, and furthermore it is based on the following scales:

Loan Amount

Minimum Interest Margin

Up to €50,000,000

0.35%

From €50,000,000 – 200,000,000

0.25%

Over €200,000,000

0.125%

The Director has also determined that interest free loan agreements would in turn be subject to a deemed interest margin of 0.35% irrespective from the amount of the loan. It should be noted that intra – group interest free loans are always subject to the arm's length principle.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

We operate a free-to-view policy, asking only that you register in order to read all of our content. Please login or register to view the rest of this article.

ARTICLE
16 November 2011

Intra Group Loans (Back-To-Back Loans) Through Cyprus

Cyprus Wealth Management

Contributor

Soteris Pittas & Co LLC logo
SOTERIS PITTAS & CO LLC is a boutique law firm, in size only, focusing on the areas of law related to business activity and dedicated to providing its clients with outstanding, highly personalized, legal representation
See More Popular Content From

Mondaq uses cookies on this website. By using our website you agree to our use of cookies as set out in our Privacy Policy.

Learn More