Transfer pricing governs the prices charged between related parties — companies under common control that trade, lend or licence with one another. The principle is simple: those prices must be set as if the parties were independent, at arm's length, so profit is not artificially shifted to where tax is lowest. Cyprus codified this in Article 33 of the Income Tax Law and, since 1 January 2022, has operated a full OECD-aligned documentation regime. For 2026 the documentation thresholds have been raised, easing the burden on smaller intra-group flows while keeping the core obligations firmly in place.
If your company lends to, borrows from, buys from, sells to, or licenses IP to a connected company — domestic or foreign — transfer pricing applies to you. This guide explains the arm's-length principle, the Local File and Master File, the 2026 thresholds, the Summary Information Table that almost everyone must file, the deadlines and the penalties.
The arm's-length principle
Under Article 33 of the Income Tax Law, transactions between associated enterprises must reflect the terms that independent parties would have agreed. If a Cyprus company charges a related party too little (or pays too much), the Tax Department can adjust the taxable profit to the arm's-length amount. The analysis follows the OECD Transfer Pricing Guidelines — selecting the most appropriate pricing method, benchmarking against comparable independent transactions, and documenting the reasoning.
Controlled (or related-party) transactions are dealings between associated enterprises — broadly, companies connected by more than 25% common participation, directly or indirectly. They include intra-group loans and financing, sales of goods, provision of services, and licensing of intellectual property.
The documentation: Local File, Master File and the table
Cyprus's documentation regime has three components:
- the Local File — a detailed analysis of the Cyprus entity's own controlled transactions, with functional analysis, the chosen method and benchmarking;
- the Master File — a group-level overview of the multinational's structure, business, intangibles and financing; and
- the Summary Information Table (SIT) — a return listing the entity's controlled transactions, filed electronically with the income tax return.
The Local File and Master File are only required where thresholds are met (below); the Summary Information Table is required from every taxpayer with controlled transactions, regardless of size.
The 2026 Local File thresholds
A Cyprus entity must prepare a Local File where its controlled transactions in a category exceed the relevant annual threshold. These thresholds were increased from 1 January 2026, which removes many smaller groups from the full Local File obligation:
| Category of controlled transaction | Threshold to 2025 | Threshold from 2026 |
|---|---|---|
| Financing / financial transactions | €5,000,000 | €10,000,000 |
| Goods | €1,000,000 | €5,000,000 |
| Services, royalties / IP and other | €1,000,000 | €2,500,000 |
The thresholds are applied per category and per year, so a group can be over the threshold for financing but under it for services. Even where you are below all of them, you are not off the hook entirely — see the Summary Information Table and minimum documentation below.
When the Master File applies
The Master File is required where a Cyprus tax resident is the ultimate parent entity (or surrogate parent) of a multinational group that falls within country-by-country reporting scope — broadly, a group with consolidated revenue of at least €750 million. For most owner-managed and mid-market Cyprus structures the Master File will not apply, but the Local File and the Summary Information Table frequently will.
The Summary Information Table and minimum documentation
The Summary Information Table is the universal obligation: every entity with controlled transactions must prepare it and submit it electronically together with the income tax return. Entities that fall below the Local File thresholds are exempt from the full Local File, but must still file the table and maintain minimum transfer pricing documentation in line with the Tax Department's Circular 6/2023 — enough to show that their related-party prices are reasonable.
The Local File must be prepared by the income tax return deadline and quality-reviewed by an ICPAC-licensed professional. On a request from the Tax Department, the Local File and Master File must be produced within 60 days. Because the return deadline itself moved to 31 January of the second year for tax year 2026, the documentation timeline shifts with it — plan the benchmarking work well ahead.
Penalties
The penalties are designed to make compliance the cheaper option:
| Failure | Penalty |
|---|---|
| Late / non-submission of the Summary Information Table | €500 |
| Local / Master File not produced within 61–90 days of request | €5,000 |
| Not produced within 91–120 days | €10,000 |
| Not produced after 120 days, or not at all | €20,000 |
Advance Pricing Agreements
For significant or complex related-party dealings, a company can seek an Advance Pricing Agreement (APA) with the Tax Department — unilateral, or bilateral/multilateral with other tax authorities — fixing the transfer pricing methodology in advance and removing uncertainty. The Tax Department aims to respond within around ten months, and an APA typically provides certainty for a defined future period. For groups with large or contentious intra-group flows, an APA can be well worth the effort.
Getting transfer pricing right
Transfer pricing is no longer just a large-multinational concern in Cyprus: any company with intra-group loans, service charges or IP licences needs, at minimum, a Summary Information Table and supporting documentation — and a Local File once the (now higher) thresholds are crossed. The benchmarking and functional analysis take time and expertise, and the penalties for ignoring them are real.
If your business has related-party transactions, talk to us before the return deadline. Our tax advisory and tax compliance teams scope your obligations, prepare or coordinate the documentation, file the Summary Information Table, and — where it helps — pursue an APA. It also pairs naturally with how you structure a group, covered in our Cyprus holding company guide.