CYPRUS Law and Practice Contributed by: Marios Palesis and Theodora Charalambous, Kinanis LLC
exchanges of information and findings via secure EU DAC/OECD channels and periodic co-ordination meetings, while each authority conducts its audit independently. 6.4 International Compliance Assessment Programme (ICAP) Cyprus supports and implements the OECD frame - work on international tax co-operation. While it does not currently participate in ICAP, it actively engages in other multilateral co-operation mechanisms, including the exchange of information and joint audit initiatives within the EU and OECD frameworks. 7. Advance Pricing Agreements (APAs) 7.1 Programmes Allowing for Rulings Regarding Transfer Pricing Cyprus has incorporated into its new TP regulations the opportunity for advance pricing agreements (APAs) to determine, in advance of controlled transactions, an appropriate set of criteria for the selection of pricing over a fixed period of time. These criteria include: • the method that is used or will be used; • the comparable data and the relevant adjustments that might be needed; • critical assumptions as to the functional profile and the market conditions; and • any other matter that may relate to the pricing of the transactions with related parties. Where the APA includes a request for consultation with the tax authorities of other states with which Cyprus has a double tax treaty (bilateral or multilateral APA), the taxpayer must submit this request along with all supporting documents to the foreign tax authorities as well. In such cases, the Commissioner of Taxation may hold consultations with the foreign tax authori - ties using the mutual agreement procedures (MAPs) provided in the double tax treaty concluded between the contracting states. The formal exchange of views between the competent tax authorities takes place in the form of an exchange
of position documents, which shall be made available to the applicant in accordance with the provisions that restrict and prohibit the use of information contained in an international agreement to which the Republic of Cyprus is a party and in the provisions of EU law. When an APA is agreed, the prices of the intra-group transactions will be considered to be at arm’s length, provided that they follow the APA’s terms on pricing. During the tax review, the authorities will verify only that what is agreed in the APA has been followed when pricing the transactions, and that the assump - tions, circumstances and terms on which the APA is based are still applicable. The documentation relating to the APA must be main - tained by the company for the period that it is required to maintain books and records for each tax year to which the APA applies. The APA may be revised during the period to which it applies, where the taxpayer so requests or after a request by the Commissioner of Taxation if: • the critical assumptions on which the APA is based are proven to be inadequate; • there is a substantial change in the critical assump - tions or conditions that makes it impossible to comply with the provisions of the APA; or • the MAP of the applicable treaty for the avoidance of double taxation or the EU Convention on the elimina - tion of double taxation (90/436/EEC) is exercised in the case of correction of the profits of related compa - nies for the transactions of the same taxpayer. The revised APA will be applicable from the date of its issuance until the end of the period covered by the APA that was initially agreed. The APA may be recalled by the Commissioner of Taxation during the period in which it is active if: • it is found that the facts and critical assumptions on which the APA is based are inadequate, due to false interpretation or defects for which the tax - payer is responsible; or
56 CHAMBERS.COM
Powered by FlippingBook