On 1 February 2024, the Cyprus Tax Department released updated thresholds regarding the requirement for taxpayers to prepare a Cyprus Local File for intercompany transactions covered by Section 33 of the Income Tax Law (ITL). These revised thresholds will apply to the 2022 tax year.

Under the provisions of the ITL, the Cyprus Local File requirement applies to connected individuals who are tax residents in Cyprus or have permanent establishments in Cyprus on behalf of non-tax-resident individuals (Liable Taxpayers). This obligation applies if their transactions with connected individuals either surpass (or should have surpassed based on the arm’s-length principle) EURO 750,000 in total per transaction category per tax year.

Following discussions with interested stakeholders, including the Ministry of Finance, a decision was finalized to review the thresholds mentioned above, which are:

The threshold for connected transactions falling under the “Financing” category will be increased from EURO 750,000 to EURO 5,000,000, while for other categories of connected transactions, the threshold will be increased from EURO 750,000 to EURO 1,000,000.

The threshold increase will go into force for the 2022 tax year. Any relevant changes to the ITL will be finalized later. Additionally, Circular 6/2023, which clarifies the simplification measures for taxpayers exempt from preparing the Cyprus Local File, remains unchanged.

On 6 July 2023, the Cyprus Tax Department released a circular (6/2023, “Simplification measures for persons exempt from the obligation to maintain a Cyprus Local File.”