CYPRUS Law and Practice Contributed by: Marios Palesis and Theodora Charalambous, Kinanis LLC
10. Relevance of the United Nations Practical Manual on Transfer Pricing 10.1 Impact of UN Practical Manual on Transfer Pricing The UN Practical Manual on Transfer Pricing does not have any impact on TP practice or enforcement in Cyprus. 11. Safe Harbours or Other Unique Rules 11.1 Transfer Pricing Safe Harbours As per Circular 6/2023, published by the Cyprus tax authorities on 6 July 2023, entities enter - ing into cross-border transactions can use the safe harbour rules, which are only applicable for entities not exceeding (or that should not be exceeding) the total aggregate amount of EUR5 million of related party transactions in the cat - egory of financing and the aggregate amount of EUR1 million of related party transactions in the remaining categories. The safe harbour rules apply to the following types of transactions. Types of Transactions Provision of financing in the form of loans or cash advances to related parties These are funded out of financial means, such as: • bonds; • loans from related parties; • interest-free loans from the shareholders; • cash advances; and • bank loans.
submitted for groups with revenue exceeding EUR750 million.
9. Alignment With OECD Transfer Pricing Guidelines 9.1 Alignment and Differences Although Cyprus is not a member of the OECD, in practice the Cyprus tax authorities refer to OECD materials for guidance. 9.2 Arm’s Length Principle Cyprus TP rules do not depart from the arm’s length principle. 9.3 Impact of the Base Erosion and Profit Shifting (BEPS) Project Cyprus is, to a great extent, in compliance with the minimum requirements of the OECD’s BEPS project. In particular, the new TP legislation has been introduced with the aim of complying with Action Points 8–1 “Aligning transfer pricing out- comes with value creation” of the BEPS initiative. 9.4 Impact of BEPS 2.0 There is no clear guidance regarding Cyprus’ perspective on the OECD’s BEPS 2.0 initiatives. 9.5 Entities Bearing the Risk of Another Entity’s Operations There are no provisions in the legislation for one entity to bear the risk of another entity’s opera - tions by guaranteeing the other entity a return.
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