The Cyprus Tax Department has updated FAQ 25 for Transfer Pricing, related to qualifying interest free payables to related parties.The amendment extends by two years, the transitional provisions, allowing such balances to continue being excluded from the Local File threshold calculation and from the Summary Information Table (SIT) reporting obligation, for the tax years of 2025 and 2026.
As from 2027 the borrower shall:
1. take into account the outstanding interest free payable for the purposes of assessing whether the Local File threshold has been exceeded and
2. report the outstanding interest free payable in the SIT.
In the case where the relevant provisions of the Income Tax Law are triggered with respect to such outstanding interest free payable, then the arm’s length nature of the resulting allowable deduction will be evaluated by reference to the Cyprus Local File or Minimum Transfer Pricing documentation (if applicable) that has been prepared by the Lender.
Local File threshold calculations excluding qualifying balances, should sufficiently document the basis for exclusion. Furthermore, any SIT preparatory documentation for the affected years should be amended accordingly to reflect the extended exclusion.
