Cyprus introduces Transfer Pricing Framework

On 30 June 2022, the Cyprus House of Representatives (Parliament) enacted an elaborate transfer pricing framework. The need to enact the law, was to eliminate the uncertainty in the market relating to application of the arm’s length principle as the basis for dealing with transfer pricing issues for the last 2 decades.

What are the key changes?

The following summarise the changes made to the framework:

  • In line with OECD transfer pricing guidelines
  • Introduction of the following transfer pricing documentation requirements:
  • Master File
  • Local File
  • Summary Information Table (SIT)
  • Introduction of Advanced Pricing Agreements (APA)

When is it applicable?

Effective date is 1 January 2022 onwards

What are the requirements?

The Companies are required from 1 January 2022 to submit the SIT and the relevant transfer pricing study (if applicable, subject to small size exemptions) for a particular year no later than the due date for submitting the taxpayer’s income tax return for that year.

What are the penalties?

In the event of late or non submission of the summary information table, a €500 fine is imposed whereas in case the documentation (local file and if required, the master file as well) is not made available to the Tax Commissioner within 60 days from the notification of a request, a fine of up to €20.000 can be imposed.

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