Cyprus: Increased Local file thresholds for 2026
Amendments to the income tax law include updates to transfer pricing documentation requirements.
The House of Representatives in December 2025 approved a tax reform package that included significant updates to transfer pricing documentation requirements.
Under the previous framework, Cyprus tax resident persons and permanent establishments (PEs) of nonresident entities were required to prepare a transfer pricing Local file for controlled transactions exceeding certain materiality thresholds. From the 2026 tax year onward, the revised law increases the annual thresholds for preparing a Cyprus Local file to €10 million for financial transactions, €5 million for goods transactions, and €2.5 million for other categories of controlled transactions.
The tax reform also revises the definition of “connected persons” in the income tax law. Effective January 1, 2026, a company director or consultant is considered a connected person to the company if they, individually or with other connected persons, hold at least 50% of the voting rights in board decisions, whether arising from the articles of association or shareholder authorization.
Read a January 2026 report prepared by the KPMG member firm in Cyprus