Transfer Pricing
Home / Transfer Pricing
What Transfer Pricing is
Transfer pricing is the framework that requires related parties (and dealings with permanent establishments) to price transactions at arm’s length, aligned with the OECD Transfer Pricing Guidelines. Cyprus introduced a comprehensive TP regime effective from 2022, with ongoing compliance obligations for Cyprus tax resident persons and Cyprus PEs of non-residents.
The Cyprus TP framework applies to both domestic and cross-border related-party transactions.
1) Summary Information Table (SIT) - annual reporting baseline:
Cyprus requires an annual Summary Information Table (SIT) reporting related party transactions (high-level categories, counterparties, and values). This is generally treated as a compliance baseline for any taxpayer with controlled transactions, submitted alongside the income tax return.
2) Local File:
A Local File is required when controlled transactions exceed the applicable materiality thresholds (per category), and it must demonstrate compliance with the arm’s length principle (functional analysis, method selection, benchmarking, etc.).
Under the original framework, the Local File requirement was triggered based on smaller thresholds (including the commonly referenced €750,000 per category model in earlier guidance).
Availability: Upon request by the Tax Department, the Local File must generally be made available within 60 days.
3) Master File - for large groups with Cyprus parent/surrogate parent:
A Master File is required for multinational groups meeting the relevant conditions (commonly linked to €750m consolidated revenue and Cyprus UPE/surrogate parent presence, consistent with the OECD framework adopted in Cyprus practice).
4) Penalties:
Penalties apply for late/non-submission of files after a Tax Department request, escalating based on delay.
5) Advance Pricing Agreements (APAs):
Cyprus allows Advance Pricing Agreements, enabling taxpayers to agree a pricing approach in advance with the tax authority, typically for a defined period (unilateral/bilateral/multilateral depending on the case).
From tax year 2026 onward, the law increases the Local File thresholds substantially, reducing compliance burden for smaller and mid-sized taxpayers. The new annual thresholds are:
- Financial transactions: €10 million.
- Goods transactions: €5 million.
- Other categories of controlled transactions: €2.5 million.
What does not change:
- The arm’s length principle still applies to all controlled transactions;
- The SIT remains a reporting requirement; and
- Taxpayers should still prepare a simplified transfer pricing report, and maintain related support documentation (contracts, pricing logic, comparables) even where a full Local File is not required.
Even where thresholds are not exceeded, the arm’s length principle still applies and documentation should be proportionate to risk.
Our TP practice portfolio
We provide practical TP support for Cyprus entities and groups: transaction scoping, method selection, benchmarking, Local/Master Files, SIT preparation, and TP governance that aligns with contracts and financial reporting. We also support APAs where appropriate.
FAQs for Transfer Pricing
Transfer pricing requires related-party transactions (including PE dealings) to be priced at arm’s length, generally aligned with OECD principles.
Cyprus tax resident entities and Cyprus permanent establishments of non-residents that transact with connected persons can be within scope.
SIT is an annual disclosure form summarising related-party transactions (categories, counterparties, values). It is generally filed alongside the income tax return.
A Local File is required when controlled transactions exceed the relevant materiality thresholds and must support the arm’s length outcome (method selection, analysis, benchmarking).
From 2026, thresholds increased to €10m (financial transactions), €5m (goods) and €2.5m (other categories).
Yes. Even where a Local File is not required, the arm’s length principle still applies and businesses should prepare a simplified transfer pricing report and keep related support documentation (contracts, pricing logic, comparables).
A Master File typically applies to large multinational groups that meet the relevant criteria (e.g., consolidated revenue and Cyprus parent/surrogate parent conditions) and provides group-level TP context.
Cyprus provides for Advance Pricing Agreements (APAs), allowing an agreed approach for specific transactions for a defined period (case-by-case suitability).