Sign up for tax alert emails    GTNU homepage    Tax newsroom    Email document    Print document    Download document

February 24, 2023

Cyprus Tax Authority issues FAQs on new transfer pricing legislation

  • The Cypriot Tax Authority has issued Frequently Asked Questions (FAQs) regarding the new transfer pricing legislation.

  • The Interpretive Circular 3 (dated 30 June 2017) on back-to-back financing arrangements has been revoked with effect as from 1 January 2022, as announced in the Circular issued on 5 January 2023.

  • This Alert summarizes details on the FAQs.

Executive summary

Following the enactment of the transfer pricing legislation,the Cypriot Tax Authority has issued a number of FAQs with effect as of 1 January 2022, providing guidance with respect to the transfer pricing (TP) documentation requirements as introduced in Article 33 of the Income Tax Law.

Detailed discussion

On 10 February 2023, the Cyprus Tax Authority released a set of FAQs which addresses a number of aspects relating to the application of the new TP legislation that is effective as of 1 January 2022.

One of the main points addressed relates to the revocation of the Interpretive Circular 3 (dated 30 June 2017) on back-to-back financing arrangements. The revocation is effective as from 1 January 2022, as announced in the Circular issued on 5 January 2023.

The following eight FAQs are addressed and published on Tax Department’s website.

Frequently Asked Questions

Question 1

If the controlled transactions in category "A" cumulatively exceed €750,000 or shall exceed €750,000 on the basis of the arm's-length principle as described in article 33(9)(a) of the Income Tax Law (ITL), and at the same time the controlled transactions in category "B" cumulatively do not exceed the €750,000 threshold in a tax year, is there an obligation to include the controlled transactions of category "B" in the Cyprus Local File?

  • No, there is no obligation to include category "B" controlled transactions in the Cyprus Local File.

  • Only, the controlled transactions of a category which cumulatively exceed or shall exceed €750,000 on the basis of the arm's-length principle during a tax year must be documented and analyzed in the Cyprus Local File.

  • In this specific example, it would be category "A" controlled transactions only. 

Question 2

How is the €750,000 threshold determined in the context of rental income activities during each tax year?

The threshold is determined by reference to the total rental income on the basis of the arm's-length principle in a tax year. 

Question 3

Do purchases and sales need to be aggregated for the purposes of assessing whether the threshold has been exceeded? 

Yes, the threshold refers to the absolute values of the controlled transactions for each category occurring in a tax year. For example, if total purchases and total sales amount to €400,000 and €500,000, respectively, the cumulative amount in this category is €900,000. Therefore, the threshold in this category has been exceeded.

Question 4

Are the Cyprus Local File and Summary Information Table prepared using the tax year or the accounting year of the company? 

The Cyprus Local File and Summary Information Table are prepared with respect to the tax year.

Question 5

Under which category of the Summary Information Table should financial guarantees be reported?

Financial guarantees should be reported under the category "Financial Transactions."

Question 6

Should a benchmarking study be prepared every tax year, or only if something changes with regards to the intra group loans?

  • A benchmarking study should be prepared when an intra group loan is initiated, and updated when:

    • New loans are provided or received by the company; or

    • Significant terms of the existing loans change or are amended; or

    • The functional profile of the company changes; or

    • The market and economic conditions change significantly (if applicable).

  • The above list is indicative and not exhaustive. Further guidance is provided in the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations.

  • Please note that in accordance with article 33(10) of the ITL, the master file (where applicable) and the local file must be updated every tax year. 

Question 7

Who is responsible for the completion and submission of the summary information table?

  • It is the responsibility of the taxpayer to complete the Summary Information Table.

  • The Summary Information Table is to be submitted by the statutory auditor or tax consultant. 

Question 8

Is the circular dated 30 June 2017 with title "Tax treatment of intra group back-to-back financing transactions" still applicable following the enactment of the new TP legislation and regulations? 

The back-to-back circular was revoked as from 1 January 2022.


For additional information with respect to this Alert, please contact the following:

EY Cyprus Advisory Services Limited, Transfer Pricing Services, Limassol



  1. See EY Global Tax Alert, Cyprus introduces transfer pricing rules and documentation requirements, dated 1 July 2022.

The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Ernst & Young LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact his or her Ernst & Young LLP or other tax professional prior to taking any action based upon this information. Ernst & Young LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.


Copyright © 2024, Ernst & Young LLP.


All rights reserved. No part of this document may be reproduced, retransmitted or otherwise redistributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying, or using any information storage and retrieval system, without written permission from Ernst & Young LLP.


Any U.S. tax advice contained herein was not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.


"EY" refers to the global organisation, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.


Privacy  |  Cookies  |  BCR  |  Legal  |  Global Code of Conduct Opt out of all email from EY Global Limited.


Cookie Settings

This site uses cookies to provide you with a personalized browsing experience and allows us to understand more about you. More information on the cookies we use can be found here. By clicking 'Yes, I accept' you agree and consent to our use of cookies. More information on what these cookies are and how we use them, including how you can manage them, is outlined in our Privacy Notice. Please note that your decision to decline the use of cookies is limited to this site only, and not in relation to other EY sites or Please refer to the privacy notice/policy on these sites for more information.

Yes, I accept         Find out more