NON RETURN CAPITAL CONTRIBUTIONS (NRCC)

The Cyprus Tax Department issued the tax circular EE25 on the Non Return Capital Contributions. NRCC refers to when a Cyprus company contributes to the net assets of its foreign subsidiary company without the latter issuing new shares.

The tax circular is in Greek so please find below a brief translation of the requirements that need to be met in order not to have any issues:

1. The company making the NRCC does not have the legal right at any point in time to request repayment of the amount contributed.
2. The repayment of the NRCC is possible only through a capital reduction or dissolution / liquidation of the recipient based on the legal framework of the jurisdiction of the recipient. This requirement may not apply if the legal framework of the jurisdiction of the recipient allows the recipient the possibility to return the NRCC without a capital reduction.
3. The return of the NRCC does not take place earlier than two years from the end of the year that the contribution is made.
4. The company making the NRCC has a direct shareholding in the company that receives the NRCC.
5. The recipient of the NRCC does not claim a tax deduction in the form of deemed interest expense with respect to the NRCC.

Any expenses relating (directly or proportionately) to the above NRCC are disallowed for tax purposes (as it applies for shares)

 

The circular can be applied from 1^st January 2017.