Insights

Cyprus: New Guidance on Transfer Pricing Regulations

Christos A. Theophilou 02 Aug 2024

An analysis by STI Taxand, Taxand Cyprus  

The Cyprus Tax Authorities (CTA) has recently released new guidance on Transfer Pricing (TP) regulations, detailing procedures for completing the summary information table (SIT). The SIT requires detailed information on related party transactions which are often overlooked – including counterparties, tax residency, and transaction values across five categories: goods, services, financial transactions, IP licenses/royalties, and others. The proper identification and documentation of these transactions are crucial to avoid penalties.

Christos Theophilou from our Cypriot partner firm STI Taxand has analysed some key points of this guidance, published in Bloomberg Tax, which includes:

• Income from (In)tangible Assets: Assets used by related companies without remuneration must be evaluated and priced according to OECD guidelines. This includes “off-balance sheet” assets not recognised under IFRS but significant for TP purposes.
• Income from Services: Intra-group services provided without charge must be priced at arm’s length to ensure compliance with TP regulations. This includes services like accounting, HR, compliance, and marketing.
• Financial Transactions: Guarantees and cash pooling arrangements must reflect arm’s length remuneration. For example, a Cyprus company providing a financial guarantee to a subsidiary should charge a guarantee fee, and compensation in cash pooling must align with arm’s length interest rates.

You can read the full article on this new guidance here.

Article tags

Bloomberg Tax | Cyprus | Tax | Transfer Pricing