The aim of the bills is to adopt the Organisation for Economic Co-operation and Development's Guidelines for Certain Actions against Tax Base Erosion and Profit Transfer to set clear standards for guiding intra-group transactions through rules, as well as the legal basis for concluding intra-group pricing agreements.
As reported by then spokesperson of the Ministry of Finance, it is a "very important" package of bills which defines the methodology of prices which will be established for tax purposes, transactions between related persons.
He also said that the bills also introduce a provision which gives taxpayers the right to approach the Tax Commissioner to request pre-approval of a controlled transaction price methodology.
He said that the framework of controlled transaction pricing rules has been made in line with the Organisation for Economic Co-operation and Development guidelines against tax base erosion and profit shifting and noted that the bills have been agreed with the ACA.
In addition, a representative of the Taxation Department said that the bills attempt to introduce a tax framework regarding transactions carried out between related persons and noted that investors are given the opportunity to come close to the Cyprus tax authorities to reach an agreement that cannot be overturned by other EU countries.
He added that the aim of the legislative framework is to ensure that the pricing of these transactions is based on the arm's length principle i.e. it reflects, as he explained, the correct market pricing that would be carried out if these persons were not related but independent.
He noted that connected persons tend to price their transactions with each other in a way that reduces the total tax liability of the group to which they belong or the total tax liability of the ultimate shareholders to whom they belong if they are individuals.
It was also reported by a representative of the Department of Taxation that this legislation will provide certainty and certainty to investors in relation to how controlled transactions are handled and noted that "such legislation is important for our country especially in times like these".
A representative of the Legal Service said that administrative fines are imposed under the Law on the Certification and Collection of Taxes and added that in the process, changes will be considered and the corresponding legislative review will be carried out on all bills.
The FCC representative said that 60% to 70% of global transactions are between groups of companies and noted that this legislation "is very important for Cyprus and is the product of discussions over the last five years".
In addition, the Finance Committee discussed in principle a bill amending the Insurance and Reinsurance Operations and Other Related Matters Act to safeguard the proper functioning and stability of the insurance market, due to the UK's withdrawal from the European Union, in order to ensure the protection of beneficiaries under insurance contracts.
It also discussed in principle a Bill amending the Insurance and Reinsurance Business and Other Related Matters Act to improve the procedure for winding up an insurance undertaking in the event of the withdrawal of its licence to carry on insurance business.
Finally, the Committee discussed in principle a bill to give the Minister of Finance the power to determine the procedure and mode of operation of alternative stamping, including stamping using electronic means.
Source: KYPE
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