In December 2025, the House of Representatives approved amendments to the Income Tax Law of 2002 (as amended) (the “ITL”) as part of the tax reform initiative. The amendments were published in the Official Gazette of the Republic of Cyprus on 31 December 2025 and are effective from 1 January 2026.

Local File (from 01 January 2026 onwards)

Cyprus tax resident persons and permanent establishments (“PEs”) of non-resident entities are required to prepare a Transfer Pricing Local File in respect of controlled transactions with connected persons where the relevant materiality thresholds are exceeded.

As from 2026 tax year onwards, the revised legislation increases the annual thresholds for the preparation of a Cyprus Local File as follows:

• Financial transactions: €10 million
• Goods transactions: €5 million
• Other categories of controlled transactions: €2.5 million

Compliance considerations

Taxpayers are encouraged to proactively evaluate their transfer pricing compliance obligations to ensure timely fulfilment of the Summary Information Tabel (“SIT”) submission requirements and the preparation of appropriate transfer pricing documentation in accordance with Article 33 of the ITL and Circular 6/2023. Depending on the specific facts and circumstances, this may include the preparation of a Local File, Master File and/or minimum transfer pricing documentation (Simplified Transfer Pricing Study).

It is further noted that taxpayers and PEs engaged in controlled transactions who are exempt from the obligation to prepare a Cyprus Local File remain subject to the requirement to submit the SIT and to maintain minimum transfer pricing documentation in accordance with Circular 6/2023 for all controlled transactions not exceeding the applicable thresholds on an aggregate annual basis.

Transitional provisions

For tax years prior to 2026, the following lower Local File thresholds continue to apply:

• Financial transactions: €5 million
• Other categories of controlled transactions: €1 million

How can we help

At FINCAP Advisers Ltd, our dedicated tax team offers comprehensive services, including:

• Corporate and international tax advisory
• Personal tax planning and compliance

We combine technical expertise with practical solutions to help clients navigate the evolving tax landscape efficiently and confidently.

Should you like to further discuss the content and potential impact of the above to your business, please contact our trusted advisors from the Tax Department.