Starting January 1, 2022, Cyprus has introduced robust transfer pricing rules for transactions between related companies. Cyprus-based businesses must maintain meticulous documentation to prove compliance with the arm’s length principle. This documentation encompasses various transactions exceeding 750 thousand euros per tax year.
In general, transfer pricing regulations
When a business engages in transactions with related entities across borders, transfer pricing policies must be established that ensure transactions are conducted at arm’s length prices. This helps prevent profit shifting and transfer pricing disputes with tax authorities.
In Cyprus, transfer pricing regulations
As of January 1, 2022, Cyprus has implemented comprehensive regulations governing transfer pricing, specifically for “transactions between related companies.” In Cyprus, the obligation rests on Cyprus companies to compile a meticulous transfer pricing study and maintain a robust transfer pricing Cyprus documentation file. This file serves as evidence that intercompany transactions with related parties have adhered to the arm’s length principle.
Cyprus companies are mandated to maintain a transfer pricing Cyprus Documentation File encompasses Cyprus companies or Cyprus permanent establishments. Their intercompany transactions with related companies, where the term “related” includes companies that share a common direct or indirect ownership exceeding 25% (under specific conditions), are scrutinized. These transactions, collectively categorized under goods, services, rights, other intangible assets, and financial dealings, should either exceed or have the potential to surpass the 750 thousand euros threshold per tax year if executed at arm’s length.
In conclusion, Cyprus’s introduction of comprehensive transfer pricing regulations underscores its commitment to transparency and fairness in international business transactions. Adhering to the arm’s length principle and maintaining meticulous documentation is pivotal for Cyprus-based companies. These regulations are designed to ensure compliance with OECD recommendations, and our publications offer valuable insights to assist businesses in navigating this intricate landscape. Staying compliant with Cyprus’s evolving transfer pricing landscape is essential for international enterprises seeking success in this dynamic business environment.
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