The Cyprus Tax Department has updated the return indicators for intra-group financing

The Cyprus Tax Department has published Circular 5/2026 of 12 October 2026, which revises the minimum and maximum return indicators set out in paragraphs 14, 18 and 25 of Circular 6/2023.

The changes concern the application of simplification measures when documenting controlled transactions between related parties. The main area of regulation is intra-group financial transactions and transfer pricing. The circular applies from the 2026 tax year.

The previously applicable minimum return of 2.5% is being revised. If a company does not control the risks of the relevant financial transaction and does not have the financial capacity to bear them, the new minimum return is 0.5% before tax.

In other situations the indicator depends on the conditions set out in the circular and on the results of the functional analysis of the specific transaction.

For transactions covered by paragraph 25 of Circular 6/2023, the indicator for the maximum cost of financing has changed. Previously the yield on the ten-year Cyprus government bond plus 1.5 percentage points was used.

The margin is now increased to 1.75 percentage points.

For transactions denominated in a currency other than the national currency of the borrower's country, the procedure for determining the applicable government bond rate is clarified.

If the required benchmark is not available on the Tax Department's website, the circular provides for contacting the intra-group transactions unit for clarification.

The change concerns Cypriot holding companies, international corporate groups, companies with intra-group loans, as well as tax advisers and transfer pricing specialists, especially those who use simplified approaches to calculating the return on intra-group financial transactions.

It is worth checking whether the new indicators apply to existing and planned intra-group loans, whether the functional analysis matches the circular's conditions, and whether the calculations for the 2026 tax year need to be revised. Important: this is a change to the Tax Department's administrative tax guidance, not a new law passed by parliament.