On 1 February 2024, the Cyprus Tax Department sent a letter addressed to the Institute of Certified Public Accountants of Cyprus (among other recipients), informing that the Ministry of Finance has agreed to increase the thresholds for exemption from the obligation to prepare a Cyprus Local File for transfer pricing purposes.
By way of reminder, the transfer pricing rules as per the Cyprus Income Tax Law impose documentation requirements to Cypriot tax resident persons (both legal and physical) and to permanent establishments of non-tax resident entities for certain transactions undertaken with related parties (‘controlled transactions’), in case where such transactions exceed certain thresholds per year, per category of transactions. For more details you may refer to our Information Sheet 146 by clicking here.
As per the Tax Department’s letter, with effect from tax year 2022, the threshold is increased from €750,000 to:
- €5,000,000 for controlled transactions falling under the category of ‘financial transactions’, and
- €1,000,000 for controlled transactions falling under any of the other categories (trade of goods, services, intellectual property, other).
The letter clarifies that, until the necessary consultations are concluded and the necessary amendments to the Law are effected, the aforementioned increased thresholds shall apply as from tax year 2022.
Finally, it is noted that persons that are exempt from the obligation to prepare a Cyprus Local File - on account of their transactions falling below the aforementioned thresholds - are still obliged to comply with the provisions of Circular 6/2023 (simplification measures) and to maintain minimum Transfer Pricing documentation for their controlled transactions. For more details you may refer to our Information Sheet 146A by clicking here.
For assistance you may contact us directly.
