Back-to-Back Financing Arrangements

Back-to-Back Financing Arrangements

On the 30th June 2017 the Cyprus Tax Department issued the Circular for intra-group back-to-back financing arrangements. As follows from the Circular, any Cypriot company that is involved in such arrangements should prepare a rigorous transfer pricing study.


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Board Member, International Tax and Corporate Services

KPMG in Cyprus


A back-to-back arrangement in the definition of the Circular is any loan or cash advance financed through debt instruments, e.g. payable loans.

Purpose of a transfer pricing study is to ensure that a Cypriot intermediary financing company engaged in intra-group back-to-back financing arrangements receives an arm’s length remuneration for its activities.

The transfer pricing study should be conducted in two steps:

1. Delineation of the analysed arrangement

2. Determination of an arm’s length remuneration.

A taxpayer may also claim a simplification measure in relation to its back-to-back financing arrangements. To be eligible for this, a taxpayer should have a functional profile of an intermediary financing company that does not take significant risks in the analysed arrangement.

Starting 2018, Cypriot companies are required to answer two additional questions in the IR4 regarding back-to-back financing arrangements:

· If a company prepared a transfer pricing study for its back-to-back financing arrangements

· If a company claimed a simplification measure for such arrangements.

This measure effectively requires Cypriot companies to disclose if they were involved in back-to-back financing arrangements and if they are compliant with provisions of the Circular.

We can help you comply with these requirements. We can prepare a transfer pricing study to determine an arm’s length remuneration for an intermediary financing company in the back-to-back arrangement.

For more information on how we can help you, contact us today.


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