LATEST UPDATESTaxNavigating Cyprus’ Transfer Pricing Landscape: Updated Thresholds

4 March 2024

In continuation of our article issued in September 2023, in an important announcement on February 1, 2024, the Cyprus Tax Department (CTD) has paved the way for a significant shift in the tax landscape of Cyprus, directly impacting businesses engaged in controlled transactions. This change, communicated to the Institute of Certified Public Accountants of Cyprus and other stakeholders, signifies the Ministry of Finance’s decision to amend the exemption thresholds for the obligation to prepare a Cyprus Local File.

What’s Changing?

Previously set at EUR 750,000, the thresholds for exemption have been notably increased to:

  • EUR 5,000,000 for controlled transactions categorized under financial transactions.
  • EUR 1,000,000 for all other controlled transaction types.

This adjustment is not just a minor tweak but a transformative shift that will apply from the tax year 2022, marking a new chapter for businesses operating within Cyprus’ jurisdiction.

The Scope and Impact
The revision aims to streamline compliance requirements and reduce the administrative burden on businesses, fostering a more conducive business environment. This initiative is part of a broader amendment of the Cyprus Income Tax Legislation, specifically targeting Article 33(9)(a).
The anticipation within the business and accounting communities is palpable, as the Ministry of Finance is drafting a bill for this legislative amendment. The Commissioner of Taxation has provided interim thresholds until the final enactment of this legislative change, ensuring a smooth transition for affected entities.

Beyond the Thresholds
It’s crucial to note that the Circular 6/2023 provisions, which address the need for Minimum Documentation and Simplification Measures (including safe harbour rates) for certain transactions, will remain in effect. This continuity ensures that transactions falling below the revised thresholds will still benefit from streamlined documentation requirements, balancing regulatory compliance and operational efficiency.

What This Means for Your Business
This change is more than just a regulatory update; it’s an opportunity for businesses to reassess their tax planning and compliance strategies. For many, it could mean reduced compliance costs and a more straightforward process for preparing Cyprus Local Files. However, navigating these changes effectively requires a nuanced understanding of the new thresholds and the broader implications for tax planning and documentation.

How We Can Help
Our expertise in Cyprus tax services positions us perfectly to guide you through these changes. Whether you’re assessing the impact on your financial transactions or exploring how the revised thresholds could benefit your business, we’re here to provide the clarity and strategic insight you need. Our goal is not just to ensure compliance but to leverage these changes to your advantage.

  • Strategic Consultation:Tailored advice on how to adapt your tax strategies in light of the new thresholds.
  • Compliance Assistance:Ensuring your business meets all requirements while maximizing operational efficien-cy.
  • Ongoing Support:As the legislative landscape evolves, we’re here to keep you informed and prepared for what’s next.

Looking Ahead
As we await the final enactment of these amendments, now is the time to begin preparing for the changes ahead. With our expertise and support, you can navigate this transition smoothly and emerge more resilient and strategically positioned than ever before.

For comprehensive insights and guidance, we invite you to reach out to our team at:

Charles Savva
Managing Director

BA, MBA, TEP, CA

c.savva@savvacyprus.com

+357 22516671

Mina Pieri
Senior Manager

FCCA, MBA

m.pieri@savvacyprus.com

+357 22510207

Christos Tsaousis
Senior Manager

FCCA, BSC

c.tsaousis@savvacyprus.com

+357 22510206

We look forward to addressing your questions and providing the necessary guidance for your business needs.

Savva & Associates

Can assist you with all your Cyprus business needs

Can assist you with all
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