Cyprus has updated its transfer pricing documentation requirements, significantly impacting how businesses handle Local File preparations starting from 2026. The House of Representatives passed a reform package in December 2025, bringing about crucial changes to the materiality thresholds for transfer pricing reporting and adjusting the definition of connected persons.
These updates will directly influence multinational enterprises (MNEs) and Cyprus-based companies with controlled transactions across various categories. Here’s what you need to know:
New Local File Thresholds: What’s Changed?
Starting in 2026, Cyprus will increase the Local File threshold for preparing transfer pricing documentation based on transaction size:
- €10 million for financial transactions
- €5 million for goods transactions
- €2.5 million for other categories of controlled transactions
Why This Matters for MNEs
- Companies involved in large cross-border transactions may see a reduced administrative burden, as only those exceeding the new thresholds need to prepare a Local file.
- For smaller transactions, businesses can still be required to comply with transfer pricing documentation but may not need to create a full Local file.
Revised Definition of “Connected Persons”
A significant amendment is the new definition of “connected persons” in the Cyprus Income Tax Law:
- Directors or consultants are now considered connected persons if they hold at least 50% of the voting rights in a company.
- This includes both direct voting rights and those held by connected individuals (e.g., family members or related entities).
Key Implications
- The revised definition broadens the scope of related-party transactions that must be reported.
- Control relationships will now be scrutinized more closely, affecting taxable transactions between related parties.
What Multinational Groups Should Do
- Review internal transfer pricing policies to align with the new Local File thresholds.
- Reassess ownership structures and director/consultant relationships to ensure compliance with the updated definition of connected persons.
- Prepare for audits or requests for documentation related to new reporting thresholds.
How TransferPricing.report Can Support You
At TransferPricing.report, we provide expert assistance with navigating Cyprus’ transfer pricing documentation and Local File requirements.
Our services include:
- Transfer pricing policy development in line with new thresholds
- Documentation preparation for Cyprus Local Files
- Audit-readiness strategies
- Comprehensive reviews of intercompany transactions under the updated laws
Final Takeaway: Stay Ahead of Cyprus’ 2026 Transfer Pricing Changes
Cyprus’ updated Local File thresholds and connected person rules create both opportunities for simplification and new compliance challenges. Early action is essential to ensure your transfer pricing practices align with the new regulatory landscape.
Operating in Cyprus?
Confused about how these changes impact your Transfer Pricing policies?
Contact our experts to ensure your compliance strategy is ready for 2026.
In Cyprus, getting ahead of tax reforms ensures smooth compliance and avoids future risks.
This is general information only and not professional advice. Consult a professional before acting.