Provisions in the Law:

• Deadline: The Tax Rulings Division of the tax department will, on application by or on behalf of a taxpayer, issue advance tax rulings regarding actual transactions relating to tax years for which the due date for filing a tax return has not yet passed, and transactions proposed to be undertaken by existing or new entities. By way of example, ruling requests in respect of transactions concluded in the year 2015 will be accepted up to 31 March 2017, the statutory deadline for filing the 2015 tax return.

• Necessary Information: Request for tax rulings must be in a written form and addressed to the to the Commissioner of Taxation. In addition, the following information must be disclosed:

• Name and tax identification code of the parties involved, as well as the name(s) of the company (ies) of which any parties are members.
• Evidence that all the parties have filed all the tax returns properly.
• A summary of the matter of the request in respect of which the ruling is required, providing details about the tax issue under consideration.
• Detailed factual analysis of the transaction or transactions relating to the request.
• The relevant question or questions on which a ruling is required.
• The relevant extracts of the tax legislation, tax circulars or practices of the Tax Department and any relevant case-law.
• The applicant’s view on the tax treatment of the transaction.

Examples of Tax Rulings:

• IP BOX
• • • A Tax Ruling can be obtained for Cyprus Companies that own and develop Intellectual Property. In Accordance, they receive Royalty Income or Income from the sale of that IP as to whether their income/proceeds are under the Cyprus IP Box regime, therefore can take advantage of the very low effective tax rate of 2.5%.
  • CAPITAL ALLOWANCES
    • When a Cyprus tax resident Company purchases an asset (i.e. an aircraft) for which the tax law and the relevant circulars are not clear as to the Capital Allowances (Depreciation) to be claimed for tax purposes.
    • The Company can apply for a tax ruling requesting information as to over to how many years the purchase value of this asset should be written off in the books of the Company.
  • TRANSFER PRICING
    • When a Transfer Pricing Study is completed the taxpayer Company can also apply for a Tax Ruling for the specific Transfer Pricing Study in order for the Tax Department to confirm whether the Study is acceptable or not.
    • This is advisable and commonly used when the margins of the back to back financing in financing Companies are very small and the Transfer Pricing Study confirms that these are based on market rates i.e. arm’s length.      

Validity of rulings:

Rulings are binding by the Tax Department only for the applicant taxpayer and only for the facts and circumstances presented. In the ruling request and provided there is no subsequent change in the tax law which renders the ruling inapplicable.

The Tax Department will express an opinion on the applicable tax treatment of the hypothetical transaction or scenario presented to it and will not be responsible for verifying the facts presented by the applicant.