The Transfer Pricing (TP) law and regulations were voted into Law on 30 June 2022 and are effective as from 1 January 2022 (ie tax year 2022). The law and regulations are in line with OECD TP Guidelines.
Types of Transactions
All types of transactions between related parties in excess of €750.000 per category of transactions, such as
- Services
- Financing
- Intangible assets
- Goods
Who must prepare TP documentation
Cyprus resident companies and foreign entities operating through a permanent establishment in Cyprus which have transactions with related parties above the threshold of €750.000. Parties are related if one party has a direct or indirect relationship of at least 25% of the share capital or voting rights of another party.
TP documentation
The TP documentation file must consist of the following:
- Master file (MF)
This is prepared by the Ultimate Parent Entity (UPE) or Surrogate Parent Entity (SPE) of a multinational enterprise (MNE) Group which is subject to Country-by-Country Reporting purposes (ie the Group has consolidated revenues over €750 million). It should contain high-level information relevant for all group members of the MNE including an overview of the group’s business and TP policies. The MF is updated annually.
- Local file (LF)
This is prepared by the Cyprus tax resident entity if the transactions with related parties exceed €750.000 per annum per category of transactions. It should contain detailed information on the intra-group transactions, including the relevant financial information. The LF is updated annually. A licensed auditor must undertake an assurance quality review for the LF.
- Summary information table (SIT)
This is prepared by all taxpayers and includes information on related parties, the type and value of the transactions.
Deadlines
- The LF and MF, if relevant, must be prepared by the deadline of the Income Tax Return Submission (ie 15 months after the tax year) and be submitted to the Cyprus Tax Authorities within 60 days, when and if requested.
- The SIT must be prepared and submitted electronically by the deadline of the Income Tax Return Submission (ie 15 months after the tax year).
Penalties for non-compliance
- SIT- €500 penalty for failure to submit
- LF & MF- failure to provide the LF or MF within 60 days from the notice received from the Cyprus Tax Authorities the following apply:
- €5.000 if submitted between day 61 and day 90 after the request date
- €10.000 if submitted between day 91 and day 120 after the request date
- €20.000 if submitted more than 120 days after the request date
