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February 2, 2024

Cyprus tax authorities issue revised thresholds for transfer pricing documentation

  • The Cyprus Tax Department has increased the thresholds applicable to taxpayers' transfer pricing documentation obligations.
  • The higher thresholds are effective for tax year 2022.

Executive summary

On 1 February 2024, the Tax Department issued revised thresholds relating to taxpayers' obligation to prepare a Cyprus Local File for transactions falling within the ambit of Section 33 of the Income Tax Law (ITL) (i.e., intercompany transactions). The revised thresholds are applicable for the tax year 2022.

Detailed discussion

In accordance with the provisions of the ITL, the Cyprus Local File obligation arises for connected persons that are tax residents in Cyprus, or permanent establishments in Cyprus of non-tax-resident persons (Liable Taxpayers) if their transactions with connected persons either exceed (or should have exceeded based on the arm's-length principle) €750k in aggregate per category of transaction per tax year.

As a result of the discussions that took place with interested parties, including the Ministry of Finance, it was agreed to increase the above-mentioned thresholds as follows:

  • From €750k to €5m for connected transactions falling under the category "Financing
  • From €750k to €1m for all other categories of connected transactions (i.e., "Goods," "Services," "Royalties and Other Intangibles" and "Other").

The increase of the threshold is effective for the tax year 2022 and the relevant amendment of the ITL is expected to be completed at a later date.

It should be noted that the provisions of Circular 6/2023 regarding the application of simplification measures for taxpayers that are exempt from the requirement to prepare Cyprus Local File continue to apply. (For background, see EY Global Tax Alert, Cyprus tax authorities issue transfer pricing simplification measures, dated 12 July 2023.)

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Contact Information

For additional information concerning this Alert, please contact:

EY Cyprus Advisory Services Limited, Transfer Pricing Services, Limassol

Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor

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