Tip 3.1 – Cyprus Tax – Related Party Transactions to be at arm’s length in Cyprus

by Harris Sharpe | Aug 14, 2019 | Cyprus Legal Tip of the Day, Cyprus Tax

Article 33 of the Income Tax Law

The Cyprus income tax law forbids related party transaction to be carried out on preferential terms. Effectively disallowing any preferential treatment afforded due to the relation of the parties.

The Cyprus Income Tax Law taxes any income which would arise in the absence of such special treatment. Freeform translation of Article 33 of Cyprus Income Tax:

1 (a) When a business participates directly or indirectly in the management or the control of the capital of another business; or

1 (b) the same person participates directly or indirectly in the management, the control of the capital of two or more business

And in any one of the above situations, terms are inserted in the commercial or financial arrangements between them which would not be otherwise available save for the relationship that they have, then any profits that may be included in the profits of the company shall be taxed accordingly.

(2) […]

(3) For the purposes of this article:

(a) A person is connected to another person if they are husband and wife or relative up to the second degree, or a relative of the spouse.

(b) […]

(c) a company is connected to another company:

(i) If the same person has control of both companies, or if one person controls one company and a connected person control the other.

(ii) If a group of two or more people has control of each company, and the groups are formed by connected people.

(d) A company is connected to another person if it exercises control over its affairs.

Article 33A

Article 33A was introduced in 2019. It disallows any deduction of Cyprus Tax resulting from any arrangement or series of arrangements, put in place for the purpose of eliminating the tax base and which have as a purpose the obtainment of a tax advantage.

Other Publications on Cyprus Tax Law

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Cyprus 2019 NID rate

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Cyprus Kazakhstan Tax Treaty

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Cyprus Notional Interest Deduction (NID)

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Cyprus-Egypt Double Tax Agreement

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Related Party Transactions to be at arm’s length in Cyprus

The Cyprus income tax law forbids related party transaction to carry out on preferential terms. Effectively disallowing any preferential treatment afforded due to the relation of the parties. The Cyprus Income Tax Law taxes any income which would arise in the absence of such special treatment.

Harris Sharpe

Author - Photographer

For many years he has worked and devoted his skills and efforts towards building a successful career as a leading executive. From humble beginnings, his aim has always been to yield results; with a keen focus to attention to detail and client satisfaction. His experience has always been varied and not specific, at times he preferred it. With that in mind, he has dealt with CySEC on licensing and ongoing regulation, international private equity and credit fund managers, NASDAQ and NYSE listed companies occasional millionaires as well as self-made millionaires. His passion though is difficult transaction work organizing and deploying people for a common goal. Harris enjoys reading and studying the Cyprus law and sharing that information on this website.