CYPRUS Trends and Developments Contributed by: Marios Palesis and Theodora Charalambous, Kinanis LLC
It should be noted, however, that transfer pricing Cir - cular 6/2023, issued by the Cyprus Tax Department in July 2023, remains in force. The Circular sets out documentation requirements for entities whose relat - ed party transactions do not exceed the applicable materiality thresholds per transaction category. Accordingly, Cyprus taxpayers with controlled trans - actions below the revised Local File thresholds are still required, pursuant to Circular 6/2023, to maintain minimum transfer pricing documentation in the form of a simplified transfer pricing report. Furthermore, Circular 6/2023 provides for the applica - tion of unilateral safe harbour rules, where applicable. These safe harbour provisions may be used in cross- border transactions, but are strictly available only to entities that do not exceed (or are not expected to exceed) the Local File preparation thresholds in the relevant transaction category. It should also be highlighted that the use of unilateral safe harbour rules in cross-border transactions con - stitutes a reportable arrangement under the Cyprus DAC6 legislation, specifically under Hallmark E.1, and is therefore subject to mandatory disclosure obliga - tions. It should be emphasised that the remaining transfer pricing documentation obligations remain unaffected by the recent amendments. In particular, the obliga - tion to prepare a Master File continues to apply to Cyprus entities that are the ultimate parent entities of a multinational enterprise group with consolidated revenues exceeding EUR750 million. Furthermore, the obligation to submit the Summary Information Table continues to apply to all Cyprus entities engaging in related party transactions, irrespective of whether the Local File materiality thresholds are exceeded. Documentation Deadlines The Local File, Master File and simplified report must be prepared by the submission deadline of the tax return for the relevant tax year and, upon request, made available to the Tax Authorities. A licensed audi - tor is also required to undertake an assurance quality review of the Local File by the submission deadline of the taxpayer’s tax return.
Prior to the recent tax reform, the deadline for the submission of the tax return was 15 months from the end of the relevant tax year. However, following the amendment of the Assessment and Collection of Tax - es Law, as part of the broader tax reform, the submis - sion deadline has been shortened to 13 months from the end of the tax year. The documentation file must be updated annually and the update must be completed within 12 months from the end of the tax year in which the update is required. The Commissioner of Taxation has the authority to determine specific updates that are deemed neces - sary for the content of the documentation file either A significant provision in the regulations is the option for an Advance Pricing Arrangement (APA). Cyprus taxpayers can now request a pre- agreement with the Cyprus Tax Department to determine the most appro - priate set of criteria for setting transfer pricing over a fixed period of up to four years. Where the APA includes a request for consultation with the tax authorities of other states with which Cyprus has a double tax treat(bilateral or multilateral APA), the taxpayer must submit the same request, along with all the supporting documentation, to the foreign tax authorities as well. In these cases, the Commissioner of Taxation may hold consultations with the foreign tax authorities using the Mutual Agreements Procedures (MAP) provided in the double tax treaty concluded between the contracting states. on an annual or permanent basis. Advance Pricing Arrangements The formal exchange of views between the competent tax authoritiestakes place in the form of an exchange of position documents, which must be made avail - able to the applicant in accordance with the provi - sions which restrict and prohibit the use of information contained in an international agreement to which the Republic of Cyprus is a party as well as the relevant provisions of EU law. The APA will be examined by the Commissioner of Taxation who will decide whether to accept or reject it. The decision should be communicated to the taxpayer within ten months. The Commissioner can extend this
63 CHAMBERS.COM
Powered by FlippingBook