Transfer Pricing rules in Cyprus

On 30 June 2022, the Republic of Cyprus approved the new transfer pricing rules and documentation requirements which are in line with the recommendations of the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations. The effective date of the new legislation is the 1st of January 2022.

The aim of new legislation is to ensure compliance with the arm’s length principle. The new transfer pricing rules apply to transactions between “related parties”. For legal entities, the new legislation established detailed rules as to the meaning of the term related parties in order to set the different relations that a “control” situation between the parties exists (the “Controlled Transactions”). In a nutshell, the main rule of the new legislation about the existence of the related parties is when the parties have a 25% direct or indirect relationship in their share capitals, based on their share ownership, voting rights, or profit participation.

The Controlled Transactions shall comply with the following new requirements (the “TP Requirements”): (a) to prepare a transfer pricing study to justify compliance with the arm’s length principle subject the exemption which exist when the Controlled Transactions  per category of transactions, do not exceed the amount of € 750,000 per tax year; and (b) the taxpayers engaged in Controlled Transactions shall prepare and submit a summary information table annually, disclosing information for these transactions, including the names and tax identification codes of the related counterparties, and the respective nature and value per transaction category.

The new legislation has introduced new administrative penalties in case of non-compliance with the deadlines of the TP Requirements.

Please contact us if you are interested to assist you to comply with the new regulations imposing the TP Requirements.