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Cyprus introduces transfer pricing rules and documentation requirements

25 Jul 2022

The Cyprus Parliament passed a law introducing detailed transfer pricing legislation, with effect from 1 January 2022. The OECD Transfer Pricing Guidelines have been legislatively incorporated in Cyprus. The laws will enter into force once published in the Official Gazette of the Republic, which is expected to occur in the next couple of weeks.

Applicability of the new law

According to the Cyprus legislation, the new transfer pricing rules apply to transactions between related parties (legal persons and individuals). For legal entities, the new law provides detailed rules as to the meaning of the term "related parties" in an effort to capture different relations that there is a "control" situation. The main rule of the law is that when one legal entity participates in the share capital of another legal entity through the direct or indirect holding of a share of at least 25 per cent, the two parties are considered related parties.


The law provides for two types of requirements for tax residents in Cyprus.

The first one is to submit a summary information table which includes intercompany transactions, general information about the group, the profile of the business and the transfer pricing method used. This table needs to be submitted in cases where that there are transactions with related parties, irrespective of their value.

The second requirement is to prepare a TP documentation file consisting of a local file and if applicable a master file.

Local file

The local file refers to material transactions of the local taxpayer and includes a transfer pricing study to justify compliance with the arm's length principle subject to a small size exemption. The small size exemption applies when the controlled transactions cumulatively, per category, do not exceed €750,000 per tax year.

Master file

The master file provides a high-level overview in order to place the group’s transfer pricing practices in their global economic, legal, financial, and tax context. This requirement only applies to companies who act as the Ultimate Parent Entity (UPE) or Surrogate Parent Entity (SPE) of a multinational enterprise Group with a Country-by-Country Reporting obligation (eg with consolidated revenue above €750 million).

Advance pricing agreement

The new law provides for the possibility for a taxpayer to apply for an Advance Pricing Agreement (APA) for transactions with related parties. Through an APA a taxpayer can apply to the Tax Commissioner for pre-approval of the transfer pricing methodology selected, and/or the pricing of specific or existing cross-border transactions with related parties.


The TP documentation files and summary information table for a particular year should be prepared no later than the due date for submitting the taxpayer’s Income Tax Return for that year (eg currently 15 months after calendar year-end).


The new law provides specific penalty provisions. In the event of late submission of the summary information table, a €500 fine is imposed. Furthermore, if the documentation is not made available to the Tax Commissioner within 60 days from the notification of a request, a fine of €5,000 is imposed, and if it is not made available from the ninety-first day until the one hundred and twentieth day a fine of €10,000 is imposed If it is not made available at all or made available after the one hundred and twentieth day a fine equal to €20,000 is imposed.

Harneys does not currently provide such services, but please do contact us for any clarifications you may need. We can also bring you into communication with licensed local firms providing such services.


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