Cyprus introduces transfer pricing rules and documentation requirements

On 30 June 2022, the House of Representatives of Cyprus voted on and approved amendments to the Income Tax Law and the Assessment and Collection of Taxes Law in relation to transfer pricing (collectively TP legislation).

The above legislative developments aim to introduce transfer pricing rules and documentation requirements in accordance with recommendations of the Organisation for Economic Co-operation and Development on Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (OECD TP Guidelines).

The laws will enter into force once published into the  Official Gazette of the Republic, which is expected to occur in the next couple of weeks. The TP legislation will be effective as of 1 January 2022.

The local File obligation is applicable for Liable Taxpayers if their transactions with connected persons either exceed (or should have exceeded based on the arm‘s-length principle) the amount of €750,000 in aggregate per category of transaction per tax year.

Sign-off requirement:
The local file should be subject to Quality Assurance Review (sign-off) by a person who has a practicing certificate of ICPAC or any other recognized institute of certified accountants in Cyprus.

Deadline for preparation:
The local file is to be prepared by the Income Tax Return submission deadline for the respective tax year (e.g., currently 15 months after calendar year-end).

Deadline for submission:
The local file is to be made available by the Liable Taxpayer at any time after the preparation deadline and submitted to the Tax Department upon request within 60 days.

The local file is to be updated annually, and specific references made to any significant changes of the market conditions that may impact the information and data included in the local file.

Summary Information Table (SIT)L
The SIT is an additional form (Transfer Pricing return) that should reflect high-level information about the taxpayer‘s annual intercompany transactions, including details of the counterparties, category of intercompany transactions entered into, and amount per transaction category.

✔️ Obligation: The SIT reporting obligation is applicable to all Liable Taxpayers on an annual basis.
✔️ Deadline for submission: The SIT shall be submitted to the Tax Department concurrently with the Income Tax Return.

Interested in understanding how TaxModel can assist you with the impact of the legislation on the preparation of your transfer pricing documentation?