There are no thin capitalisation rules in Cyprus. As a general rule, costs are deductible in cases where the profits that are effectively connected with those costs are taxable.

The losses of Cypriot companies can be offset against future income indefinitely, though no carry back is available. Furthermore, it is possible to offset the losses of one group company against the profits of another group company, provided the relevant conditions are met (e.g. both companies are residents of Cyprus).

In cases where there is doubt about the application of the above rules (e.g. whether the activities test is met), the Cyprus tax authorities are generally amenable to advance discussions.