Cyprus introduces new rules on Transfer Pricing
In practice, Transfer Pricing is the Tax Law application of the arm's length principle, applied for determining a reliable and fair allocation and taxation of profits within multinational enterprises.
Transfer Pricing and the application of the arm’s length principle are in place to combat the base erosion and profits shifting (BEPS) from MNEs. BEPS refers mainly to the aggressive tax planning strategies used by MNEs to transfer their profits from one country to another to benefit from lower or no taxation or more favourable tax regimes.
The Cyprus House of Representatives voted for the new Transfer Pricing requirements on the 30th of June.
The new rules for Transfer Pricing were transposed into the Income Tax Law and the Collection and Assessment of Taxes Law.
The Transfer Pricing new rules align with the requirements set out in the Action 13 of the BEPS Action Plan recommended by the Organisation for Economic Cooperation and Development (OECD).
In addition, the new rules provide for Transfer Pricing documentation requirements, subject to income-based thresholds. Correspondingly, it is noteworthy to mention that the new rules provide for a procedure for the taxpayers to apply for Advance Pricing Arrangements so for them to eliminate uncertainty over the taxation of their incomes and enhance the predictability of the tax treatment.
The publication "Introduction to Transfer Pricing rules" briefly describes the new rules, as these were published in the Official Gazette of the Republic. The "Introduction to Transfer Pricing rules" publication serves as a reference tool for entrepreneurs who wish to enrich their knowledge of Cyprus Transfer Pricing rules and cannot substitute any specialised professional advice.
If you wish to discuss your Transfer Pricing questions, please get in touch with our tax professionals, who are committed to helping you by providing tax services as per your needs.
To be constantly updated with business insights and news that may affect your personal affairs or your company's operations, subscribe to our RSM Cyprus Business Insights and News.