Intra-Group Loans in Cyprus: New Transfer Pricing Rates from 2026
Smaller groups in Cyprus can price intra-group loans using fixed rates set by the Tax Department, instead of a full transfer pricing study. On 12 October 2026 the Tax Department revised those rates with Circular 5/2026. The new rates apply from tax year 2026.
UPDATED 14 OCTOBER 2026
Who can use the fixed rates
The rates come from Circular 6/2023. They are available to companies, and Cyprus permanent establishments, that do not have to keep a Cyprus Local File. That is the case where the controlled transactions in a category do not exceed €750,000 in total in a tax year.
The simplified approach covers four types of transaction:
- Loans to related parties funded by borrowing (back-to-back financing).
- Loans to related parties funded from the company's own funds.
- Borrowing from related parties used in the company's business.
- Low value-adding services within the group.
It cannot be used where the company has reliable internal comparables for the transaction.
What has changed
| Transaction | Until 2025 | From 2026 |
|---|---|---|
| Back-to-back loans, company does not take the risk | 2.5% minimum | 0.5% minimum |
| Back-to-back loans, company takes the risk | 2.5% minimum | 2% minimum |
| Loans funded from own funds | 10-year government bond of the borrower's country + 3.5% minimum | 10-year government bond of the borrower's country + 2.25% minimum |
| Borrowing used in the business | 10-year Cyprus government bond + 1.5% maximum | 10-year Cyprus government bond + 1.75% maximum |
| Low value-adding services | 5% mark-up | 5% mark-up, unchanged |
All rates are before tax. The bond yield is the rate at 31 December of the previous year. If it is negative, only the margin applies.
Back-to-back loans
Under the old rule, a company lending on borrowed money had to earn at least 2.5% on the average loan balance, after its related costs. This applied whatever the company's substance.
The minimum now depends on whether the company takes the risk of the loans:
- 0.5% if it does not. It does not control the risk and could not bear a loss.
- 2% if it does.
Either way, the minimum return is lower than before.
Loans in another currency
Circular 5/2026 also clarifies which bond yield to use where a loan is in a different currency from the borrower's local currency. The reference rate is the 10-year government bond of the same country in the currency of the loan, where the Tax Department publishes it on its website. If it is not available, the company should contact the Tax Department's Intra-group Transactions Unit to agree the rate.
What does not change
All other conditions of Circular 6/2023 stay as they are:
- The minimum documentation must still be prepared, and given to the Tax Department within 60 days if requested.
- Use of the fixed rates must still be declared in the tax return.
- Using the fixed rates for cross-border transactions still makes them reportable cross-border arrangements under DAC6.
What it means in practice
A lender charging the old rates is still compliant, but may now charge less. A borrower may now pay up to 0.25% more and still deduct it.
If you rely on the 0.5% minimum, your functional analysis must show the company does not take the risk.
The circulars
Both circulars are attached below, in the original Greek.
If you are not sure how the new rates apply to your group, speak to us.
Written by Antonis Lappas, BSc, FCCA. This is general information, not advice on your circumstances. Rules change, check the date on this article, and speak to us before acting on it.
Intra-group loans?
We can check which rate applies to your group and prepare the documentation.
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