Cyprus Tax Department updates return rates for intra-group financing

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

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

The minimum return of 2.5% that applied before is being revised. If the company does not control the risks of the 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 figure 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 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 in a currency other than the borrower's national currency, the way the applicable government bond rate is determined has been clarified.

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

The change affects Cyprus holding companies, international corporate groups, companies with intra-group loans, and tax advisers and transfer pricing specialists, especially those who use simplified approaches to calculating returns on intra-group financial transactions.

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