On 2 January 2019 the Cyprus Tax department (CT) issued a circular (ΔΕ5) explaining the practice that CT will apply in relation to the documentation of a transfer pricing study. As per the circular:
- The transfer pricing documentation file needs to be in accordance with OECD Transfer Pricing Guidelines. This is also as per the circular (EE3) issued on 30 June 2017 in relation to intra group financing transactions.
- The circular EE3, issued for the transfer pricing aspects of intra group financing transactions, summarizes the requirements, evidence and documentation needed. A more detailed guidance will be provided for the required contents of a transfer pricing documentation file in order to be considered as a complete file. The guidance will be provided upon enactment of the related transfer pricing legislation.
- The transfer pricing documentation file will not be submitted to the CT but needs to be kept by the taxpayer that has the obligation to prepare it. It needs to be kept for the same time period that the taxpayer has a statutory obligation to keep its books and records (currently 6 years). In case of a CT examination request, the transfer pricing documentation file and any supporting evidence needs to be submitted to the CT within 60 days.
- The transfer pricing legislation, which is still pending to be enacted, has a requirement for submission to the CT (by the taxpayer's representative), a table summarizing the intra group transactions during the tax year. The table needs to be submitted within 9 months after the end of the tax year (31/12). A specimen of the table is published with the current circular and the taxpayer needs to provide details such as the names of the group companies, the nature of intra group transactions, the countries that operate and whether the transactions exceed or not the threshold of €750.000.
Summarizing the above, the transfer pricing documentation file ("Local File") needs to be in accordance with OECD Transfer Pricing Guidelines and be submitted to the tax authorities, in case of request, within 60 days. There is a new filing requirement, a table summarizing the intra group transactions that needs to be filed within 9 months after the end of the calendar year (by the end of September).
There are several issues that need to be clarified from the CT, as a result of the current and EE3 circular (such as thresholds, reporting for 2017/2018 etc.) and we are expecting that the related legislation will clarify most. The new legislation is expected to be enacted during 2019.
Our transfer pricing specialists are at your disposal should you require any further information or clarifications. For our transfer pricing services please download https://premioservecy.com/PDF/Premio-Transfer-Pricing-services.pdf
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