This document summarizes the transfer pricing requirements and regulations in Cyprus. Cyprus has introduced transfer pricing (TP) rules in its income tax law, albeit later than many countries. As of 2021, Cyprus is implementing detailed TP regulations, requiring the submission of Master and/or Local files compliant with OECD standards. For intercompany transactions exceeding 750k euros annually, benchmark reports are mandatory. The new legislation is retroactive from January 1, 2020.
Cyprus may be a latecomer in adopting Transfer Pricing (TP) regulations, but change is on the horizon. In 2021, Cyprus is implementing TP rules, mandating Master and/or Local files following OECD guidelines. Additionally, intercompany transactions exceeding 750k euros annually require benchmark reports. These changes have a retroactive effective date from January 1, 2020.
Cyprus currently doesn’t have detailed TP documentation, although it upholds the arm’s length principle in its Income Tax Law Code. Amendments have been made to address intra-group financing activities, focusing on debt financing, regardless of whether it involves related parties or third parties.
Article 33 of the Income Tax Law in Cyprus outlines related parties, including direct or indirect participation in management, control, or share capital of other companies. It also covers shared control, management, or capital participation among entities. The degree of relativity is examined on a case-by-case basis.
Starting from January 1, 2022, TP documentation will be required for transactions exceeding 750k euros annually per category.
Cyprus is known for its preferential tax regime, featuring a low corporate income tax rate of 12.5%. It ceased being classified as a tax haven in 2012 and doesn’t maintain a blacklist of uncooperative countries.
Cyprus law mandates MNEs and smaller companies to submit audited accounts. TP adjustments are legal unless tax authorities prove fraud. However, as of the document’s date, Cyprus lacks legislation for notification, record-keeping, and mandatory TP documentation language.
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