CYPRUS Law and Practice Contributed by: Marios Palesis and Theodora Charalambous, Kinanis LLC
within 12 months from the end of the tax year in which the need for the update has arisen. The Commissioner of Taxation has the power to determine specific issues concerning updates that are deemed necessary regarding the con - tent of the documentation file, either on an annu - al or permanent basis. In February 2023, the Cyprus tax authorities, in an effort to ensure clear interpretation of the TP regulations and their correct application and practice, published Frequently Asked Questions providing answers to the most common queries of both taxpayers and TP practitioners. The Commissioner of Taxation will also issue further guidance as to the requirements of the docu - mentation file and the summary table, accept - able TP methods, and the methods of establish - ing the interquartile range or the profit margin. Also, in an exchange-of-information context, Cyprus implements country-by-country report - ing requirements under the Assessment and Collection of Taxes Law Decree of 2017. It is important to note that although Cyprus is not a member of the OECD, the Cyprus tax authori - ties refer to OECD materials for guidance in the field of taxation. 2. Definition of Control/Related Parties 2.1 Application of Transfer Pricing Rules The arm’s length principle has been incorpo - rated into Section 33(3) of the Cyprus Income Tax Law and shall be interpreted in line with the OECD TP Guidelines. This Section defines associated enterprises, providing the following 25% relationship test.
A company is connected with another company where: • a person and persons connected with that person hold, directly or indirectly, a partici - pation in at least 25% of the voting rights or share capital or have the right to a share of at least 25% of the income of both companies; or • a group of two or more persons holds, directly or indirectly, a participation in at least 25% of the voting rights or share capital or has a right to a share of at least 25% of the income of each company, and the group either consists of the same persons or could be regarded as consisting of the same per - sons by treating a member of either group as replaced by a person with whom they are connected. A company is connected with another person where: • a person and persons connected with that person hold, directly or indirectly, a partici - pation in at least 25% of the voting rights or share capital or have a right in at least 25% of the income of that company; or • a group of two or more persons acts together with the intention of securing, directly or indirectly, at least 25% of the voting rights or share capital or right to a share of at least 25% of the income of a company. 3. Methods and Method Selection and Application 3.1 Transfer Pricing Methods The Cyprus tax authorities suggest that the methods used by taxpayers are in line with the
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