On 1 February 2024, the Cyprus Tax Department (“CTD”) published a letter updating the thresholds for preparing a Local File for the tax year 2022.

Currently, in accordance with the provisions of the Income Tax Law of 2002, as amended, the requirements for preparing a Local File apply to Cypriot tax resident persons and Permanent Establishments (PEs) of non-tax resident entities that are engaged in controlled transactions, i.e., with related parties, during a tax year, provided that the cumulative amount per category, exceeds or should have exceeded based on the arm’s length principle the amount of EUR 750,000 (for all the categories of controlled transactions).

The stakeholders, including the Ministry of Finance, are in favor of increasing the threshold for the category of financial transactions for preparing a Local file to EUR 5 million. It should be noted that for loans the principal amount and accrued interest should be considered when examining whether the financial category exceeds the threshold.

In addition, the Ministry of Finance will propose increasing the threshold for all other categories of controlled transactions from EUR 750,000 to EUR 1 million.

Tax year 2022 – Local file thresholds

The applicable thresholds for the tax year 2022 for preparing a Cyprus Local File will be as follows:

  • Financial transactions – EUR 5 million
  • All other categories – EUR 1 million

Circular 6/2023

The CTD in its letter, emphasizes that persons that are exempt from the obligation to prepare a Cyprus Local File, are required to comply with the provisions of Circular 6/2023 and maintain minimum Transfer Pricing documentation for their controlled transactions, i.e., for transactions that do not exceed in aggregate the threshold per category, on an annual basis.

How KPMG Cyprus can assist?

Should you like to further discuss the content of the legislation and potential impact to your business, please contact one of our trusted advisors from the Tax department at KPMG in Cyprus.

Get in touch

George Markides
Board Member
Head of Tax Services
KPMG Limited

Michalis Loizides
Board Member
Tax Services
KPMG Limited

 

Costas Markides
Board Member
International Tax Services
KPMG Limited

Volodymyr Serdechniuk
Senior Manager
Transfer Pricing Services
KPMG Limited

 

Michael Halios
Board Member
International Tax Services
KPMG Limited

Michalis Fiakkou
Manager
Transfer Pricing Services
KPMG Limited

 

Connect with us

You’ve successfully logged in.

Please close this pop-up to return to the page.

Please provide the following information to register.

The email format is incorrect. This field is required Incorrect email format. Please enter corporate email address.
Email
This field is required
First Name
This field is required
Last Name
This field is required
This field is required
Company Name (optional)
This field is required
Position (optional)

Yes, I would like to receive insights, event invitations and other benefits from KPMG in Cyprus by email.

Note: Note: You will receive an email after registration to verify and activate your account. Also you will have options to self-serve to set your preferences for content personalization, subscription to newsletter, opt-in and opt-out from email communication and delete your account any time after registration. You will only receive email communications based on the selection you have made in your profile. You can unsubscribe from our communication channels and delete your account at any time. 

I acknowledge that I have read and understood the terms stated in the KPMG Online Privacy Statement.