Transfer Price is a practice in accounting occurring when goods or services are exchanged between divisions (subsidiaries, affiliates, or commonly controlled companies) of the same larger entity
On 30 June 2022 the House of Representatives voted on and approved amendments to the Income Tax Law and the Assessment and Collection of Taxes Law (TP legislation). The measures correspond with the recommendations of the Organisation for Economic Co-operation and Development (OECD) under the scope of Action 13 of the Base Erosion and Profit Shifting (BEPS) project.
The law and the regulations have established the obligation to the documentation file (master file and local file) and the table of summarized information (TSI):
• The master file applies to ultimate or surrogate parent entities of multinational corporations with annual consolidated turnover over 750 € million. It should be prepared by the corresponding due date of the corporate income tax return.
*ultimate parent entity refers to an entity which is not controlled by any other entity
*surrogate parent entity means that one constituent entity of the multi -national enterprise that is appointed by such group, as a sole substitute for the ultimate
• The local file applies to all taxpayers involved in controlled transactions and should be prepared by the corresponding due date of the corporate income tax return. However, there is the exception for the instances, when the volume of controlled transactions does not exceed € 750,000 per category of transactions.
• The table of summarized information (TSI) applies to all taxpayers involved in controlled transactions and should be submitted to the Cyprus Tax Department by the corresponding due date of the corporate income tax return.
What is it covered by the transfer pricing law and regulations?
All types of transactions between related parties (if more than 750,000€ per category of transactions):
a) Sale and purchase of Goods
b) Provision and receipt of services
c) Transactions involving IP
d) Financial services
e) Other types of transactions
Penalties for late submission or non -submission of files:
• 20.000 € is the maximum penalty for non -submission or late submission of master or local file;
• 500 € is the penalty for non -submission or late submission of TSI.
31 March 2024 is the deadline for the preparation and submission of local files, master files and TSI.