tax ruling

What Is A Tax Ruling?

A Tax Ruling is the official written reply by the Tax Department to requests for guidance on the interpretation of the Cyprus tax law.

In October 2015 the Cyprus Tax Department has issued a circular (number 2015/13) formalising the procedures for obtaining advance tax rulings and setting out the terms on which they are binding. The new procedures took effect on 1 October 2015.

When a Tax Ruling is requested:

Tax Rulings are requested when the tax treatment of a specific transaction and/or source of income is not clear.

A Tax Ruling is requested when tax professionals have a specific view or request specific guidance as to the treatment and interpretation of the Cyprus tax law.

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.

Cyprus Cooperate Services Simplified

At MariCorp we target to simplify Corporate Services as a whole and offer our clients a straightforward and simple solution.

marinos marinou

Marinos Marinou

Graduated from Liverpool John Moores University in 2011. Became a member of the Institute of Chartered Accountants of England and Wales (ICAEW) in 2015. Currently undergoing Certified Fraud Examiner (CFE) Level 1. Member of the International Tax Planning Association (ITPA).

 

Marinos is specialized in International Tax Planning, Advanced Consulting, and Corporate Services.

Contact us

Where to find us:

81, Griva Digeni Avenue, MARINOS Court, 2nd floor, office 203

P.O. BOx  42656, P.C. 6501, 6043

Larnaca – Cyprus

Tel: +357 24663402 , Fax: +357 24663409

E-mail: admin@cyprusconsultancy.com

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