What Businesses Need to Know
Transfer pricing has become a central area of tax compliance in Cyprus, particularly following the alignment with the OECD Transfer Pricing Guidelines (2022) under Article 33 of the Income Tax Law.
Any company entering into transactions with related parties must ensure that these transactions are carried out at arm’s length — meaning under terms that would apply between independent parties.
Scope of Transfer Pricing Rules
A common misconception is that transfer pricing applies only to loans. In reality, it covers a much broader range of transactions, including services, recharges, and even interest-free balances.
Cyprus has introduced specific documentation requirements, including the Summary Information Table (SIT) and, where thresholds are exceeded, the preparation of a Local File.
Why Compliance is Critical
Transfer pricing is not just a regulatory exercise. It directly impacts the taxable profits of a company.
Inadequate documentation or incorrect pricing can lead to adjustments, penalties, and increased scrutiny during tax audits.
A Practical Approach
A well-prepared transfer pricing analysis should clearly demonstrate:
- The commercial rationale of the transaction
- The economic profile of the company
- The basis for pricing
- This is not about producing lengthy reports, but about producing defensible positions.