The arrival of DAC6 in Cyprus

International Tax Review is part of Legal Benchmarking Limited, 1-2 Paris Garden, London, SE1 8ND

Copyright © Legal Benchmarking Limited and its affiliated companies 2025

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

The arrival of DAC6 in Cyprus

Sponsored by

taxexperts.png
DAC 6 is expected to be transposed into Cypriot national law by the end of January 2021

Konstantinos Nanopoulos, Victoria Iliopoulou and Nicholas Demiroglou of TaxExperts Group explore what the introduction of DAC6 means for Cyprus’s transfer pricing world.

In view of the impending expiry of the deadlines for reporting according to DAC6 guidelines, many European countries have already inaugurated the technical guidelines and platform for the automatic filing and exchange of information. Among them, the Cypriot tax authority, after the adoption of a six-month deferral because of the COVID-19 pandemic, published on January 5 2021, two official announcements introducing the implementation of DAC6.



The foregoing implementation, which would have been normally started from July 1 2020 according to the time frames and deadlines set by the Council Directive (EU) 2020/876 of June 24 2020, if the six-month deferral had not been enabled, was eventually initiated on January 5 2021 by the registration of the intermediaries/taxpayers in the electronic governmental platform known as ‘Ariadne’.



Upon identification of the intermediary, the upload of the XML files will be available. The mandatory disclosure regime (i.e. DAC 6) is expected to be transposed into Cypriot national law by the end of January 2021, and to that extent, reporting is not mandatory until it is.



More specifically, the deadlines for the reporting submission obligation are listed below. The reported cross-border arrangement is considered to be effected from the date which is consisted available or is ready to be implemented.



 Cross-border arrangements reporting periods

 Deadline

 June 25 2018 – June 30 2021

 February 28 2021

 July 1 2020 – December 31 2020

 Within 30 days starting from January 1 2021

 January 1 2021 and onwards

 Within 30 days

 From the 1st periodic report 

 Until April 30 2021



Reportable transactions falling within the TP scheme

While the reporting obligation includes hallmarks, which are described as ‘cross-border arrangements’, not all of them should assessed from a transfer pricing (TP) perspective.



More specifically, the arrangements bearing TP hallmark could be the following: 

Arrangements which involve the use of unilateral safe harbour rules

Bilateral or multilateral advance pricing agreements (APAs) which have been approved by the tax authorities, thus not considered to be ‘unilateral safe harbours’, do not fall within the scope of this hallmark.



In addition, the following types of arrangements will not be considered to involve the use of unilateral safe harbour rules, and are thus not reportable:

  • Any arrangement including administrative simplification measures which do not directly involve the determination of arm’s-length prices, such as the agreement on the absence or simplification of a pricing documentation.

  • Arrangements that adopt the simplified approach of low value intra-group services without the elaboration of a benchmarking exercise.

  • Arrangements involving provisions that exclude the application of safe harbours to ‘simple’ or ‘small’ transactions, according to which taxpayers may be tempted to break transactions up into parts to make them seem simple or small. 


Arrangements involving transfer of hard-to-value intangibles

This hallmark applies to arrangements that involve the transfer of hard-to-value intangibles and/or hard-to-value rights in intangibles between associated enterprises. More specifically, to define if an arrangement bears this hallmark it is critical to investigate if at the time of transfer of intangibles between associated enterprises, the comparability analysis reveals that there are no reliable comparable uncontrolled transactions that can be used to determine the arm’s-length principle and other conditions.   

The 50% intra-group EBIT test

This hallmark applies to an arrangement involving an intra-group cross-border transfer of functions; and/or risks; and/or assets, if the projected annual earnings before interest and taxes (EBIT) of the transferor(s) for the three-year period after the transfer, are less than 50% of the projected annual EBIT of the transferor(s) if the transfer had not been made. 



It is questionable how an intermediary is expected to perform and verify the accuracy of the EBIT test. The possible answer is that the EBIT test should be conducted by an independent party, such as an auditor, and the intermediary to rely on the outcome. 



If the intermediary could substantiate that the transferors’ EBIT is less than 50% of what it would have been, the reporting obligations under this hallmark can be reasonably waived.

Concluding remarks

Further interpretations from the Cypriot tax authorities are awaited on the TP considerations with respect to foregoing hallmarks, while the general technical guidelines for the elaboration of the platform and the voluntarily reporting have been provided. Greece for instance is rather slow in adoption, while Malta, Germany and Austria have notified interested parties on the reporting process and the XML files. 



Irrespective of the learning curve, the rulings and the language used in every jurisdiction, the intermediaries should follow the general guidelines provided by the OECD and the main interpretations of the EU.



Finally, we will not be surprised if the EU grants a subsequent six-month extension due to the obstacles caused by COVID-19. 





Konstantinos Nanopoulos

Managing partner

E: knanopoulos@transferpricing.com.cy



Victoria Iliopoulou

Partner

E: v.iliopoulou@taxexperts.eu



Nicholas Demiroglou

Partner

E: ndemiroglou@transferpricing.com.cy

more across site & shared bottom lb ros

More from across our site

The threat of 50% tariffs on Brazilian goods coincides with new Brazilian legal powers to adopt retaliatory economic measures, local experts tell ITR
The country’s chancellor appears to have backtracked from previous pillar two scepticism; in other news, Donald Trump threatened Russia with 100% tariffs
In its latest G20 update, the OECD also revealed tense discussions with the US where the ‘significant threat’ of Section 899 was highlighted
The tax agency has increased compliance yield from wealthy individuals but cannot identify how much tax is paid by UK billionaires, the committee also claimed
Saffery cautioned that documentation requirements in new government proposals must be limited if medium-sized companies are not exempted from TP
The global minimum tax deal is not viable without US participation, Friedrich Merz has argued
Section 899 of the ‘one big beautiful’ bill would have spelled disaster for many international investors into the US, but following its shelving, attention turns to the fate of the OECD’s pillars
DLA Piper’s co-head of tax for the US and Latin America tells ITR about her fervent belief in equal access to the law, loving yoga, and paternal inspirations
Tax expert Craig Hillier agrees with the comparison of pillar two to using a sledgehammer to crack a nut
The amount is reported to be up 57% from the £5.6bn that the UK tax agency believes was underpaid in the previous year
Gift this article