Cyprus Tax Department has published a new circular regarding detailed transfer pricing rules which came into force on July 1, 2017. The new rules replaced the existing rules to determine the tax base of the “back-to-back” intra-group loan on the basis of a minimum margin.
Arm’s length principle has been included in Article 33 of the Income Tax Law (ITL) of 2002, which defines the concept of related parties as well. The new rules are still based on the arm’s length test, and the scope of intra-group transaction is also clarified. As regards comparability test, two issues should be taken into consideration:
According to the circular, transfer pricing analysis should be carried under the "transfer pricing expert" while the qualification is not defined. By submitting to the Tax Department, the analysis is required to cover several issues, including the general description of market conditions, the accurate scope of transactions concerned, a list of comparable transactions selected, etc.
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