Transfer pricing – new thresholds for preparation of the Local Files

Article 33 & Article 33C of the Income Tax Law, Κ.Δ.Π. 314/2022 and Κ.Δ.Π. 273/2022, with effect from 1 January 2022.

As of 1 January 2022, the Cyprus Tax Department introduced new transfer pricing rules requiring each business to file, on an annual basis, information on its controlled transactions and/or balances (transactions between related parties, including shareholder current accounts) through the following reports:

• Cyprus Local File – if controlled transactions cumulatively per category exceed €1,000,000, and/or €5,000,000 for financing (loan) transactions.
• Master File – exempt unless the entity is the Ultimate Parent Entity (or Surrogate Parent Entity) of a large group.
• Summary Information Table – compulsory and submitted together with the tax return.

A small-size exemption applies as per the criteria above.

The Local File focuses on the information relevant to the Transfer Pricing (TP) study: transactions between related parties, relevant financial information, a comparability analysis and the selection and application of the most appropriate TP method.

The Summary Information Table must be prepared and submitted by every business with controlled transactions and/or balances in a tax year, irrespective of their value. The submission deadline for the year 2022 was 30 November 2024; it is submitted electronically through the Tax For All (TFA) system.

At ACLA Auditors, we can assist you with the preparation and submission of these files and reports according to your needs and obligations under the Income Tax Law.