On February 1, 2024, the Commissioner of Taxation dispatched a letter to the Institute of Certified Public Accountants of Cyprus, the Cyprus Chamber of Commerce and Industry, and the Cyprus Employers and Industrialists Federation, notifying them of the increased thresholds for Local File requirements applicable to the tax year 2022.
As a reminder, the Transfer Pricing ("TP") rules stipulate that the combined (arm’s length) value of all transactions within a specific category must be considered to assess whether the relevant threshold has been surpassed. The obligation exists for businesses that are residents in the Republic or have permanent establishments in the Republic for individuals who are not residents of the Republic, conducting controlled transactions during the tax year. If their controlled transactions, cumulatively by category, exceed or should have exceeded, based on the arm's length principle, the amount of €750,000 euros per tax year, there is a requirement to maintain and submit to the Taxation Department the Cyprus Transfer Pricing Documentation File. According to the draft Summary Information Table for Connected Persons published in Notification 314/2022 by the Commissioner of Tax, the five pertinent transaction categories are Goods, Services, Rights and other Intangible Assets, Financial Transactions, and Other Transactions.
While increases in the thresholds have garnered support from various stakeholders, the legal process must be followed to effect the necessary legislative changes for implementation. Meanwhile, the Commissioner of Taxation has officially announced in the letter that, for the sake of providing clarity to taxpayers and their advisors, an increase in the thresholds will be applicable for the tax year 2022.
The pertinent changes to the thresholds for the tax year 2022 are outlined as follows:
The issuance of this letter offers additional clarity to taxpayers as they prepare their TP documentation for the tax year 2022 and is anticipated to alleviate compliance burdens for several Cyprus tax resident taxpayers.
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