CYPRUS Law and Practice Contributed by: Marios Palesis and Theodora Charalambous, Kinanis LLC
These criteria include: • the method that is used or will be used; • the comparable data and the relevant adjust - ments that might be needed; • critical assumptions as to the functional pro - file 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 consulta - tion with the tax authorities of other states with which Cyprus has a double tax treaty in place (bilateral or multilateral APA), the taxpayer must submit this request with all supporting docu - ments to the foreign tax authorities as well. In this case, 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 con - cluded between the contracting states. The formal exchange of views between the com - petent 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 at arm’s length provided that they follow the APA’s details on pricing. During the tax review, the authorities will only ensure that what is agreed in the APA has been followed when pricing the transac - tions, and that the assumptions, circumstances and terms on which the APA is based are still applicable.
The documentation relating to the APA must be maintained by the company for the period where it is obliged to maintain books and records for each tax year that the APA relates to. 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 Taxa - tion if: • the critical assumptions on which the APA is based are proven to be inadequate; • there is a substantial change in the criti - cal assumptions 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 Con - vention on the elimination of double taxation (90/436/EEC) is exercised in the case of cor - rection of the profits of related companies for the transactions of the same taxpayer. The revised APA will be applicable from the date of issue of the revised version until the end of the period of 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 assump - tions on which the APA is based are inad - equate, due to false interpretation or defects for which the taxpayer is responsible; or • it is found that the taxpayer has not complied with substantive conditions or obligations as set out in the APA. Where the APA is recalled, it is considered as never having been issued in the first place.
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