Legal basis (up to 2022)

Cyprus has had no detailed transfer pricing (“TP”) legislation included in its income tax law. As of 2002, the arm‘s length principle is codified in section 33 of the Cyprus Income Tax Law, as amended (“CITL”) with wording similar to that of Article 9 of the 2017 OECD Model on Associated Enterprises and therefore the Cypriot Tax Authorities (“CTA”) follow the arm‘s length principle.


The Cypriot TP rules require that transactions between associated persons should take place at arm‘s length. On 30 June 2017, the CTA issued a circular with respect to the new rules for the taxation of intra-group financing arrangements. 


The application of the circular is limited to intra-group financing activities that are financed by debt instruments, regardless of whether related or third parties are the source of the funding.


The new legislation for the taxation of intra-group financing arrangements was enacted on 1 July 2017.

Expected developments

As of 2021, detailed transfer pricing rules are expected. Most importantly, it‘s expected that the new legislation will include a requirement for OECD compliant Master and/or Local files, including Benchmark reports for intercompany transactions exceeding the amount of €750k per category. The amount is calculated on an annually aggregated level. 


We would like to point out that the new legislation is expected to include retroactive effects. The requirements of the law will be in effect as of 1 January 2022.

In short

As of 1 January 2022, the following compliance requirements are expected:

  1. Master file
  2. Local file
  3. Benchmark study
  4. Country-by-Country reporting 

The compliance requirements apply to taxpayers engaging in cross-border intercompany transactions, exceeding an annual aggregated amount of EUR 750.000, per category, per year. 


Please feel free to reach out to our transfer pricing and tax technology experts. We‘re happy to help you prepare for the new transfer pricing requirements.


Book a meeting via this link!