CYPRUS Law and Practice Contributed by: Marios Palesis and Theodora Charalambous, Kinanis LLC
• the decision of the advance pricing agree - ment (APA) or tax ruling, if any. The auditor of the company must review the Cyprus local file to ensure its quality by the deadline of submission of the corporation tax return for the tax year in question. A master file must be prepared when the con - solidated revenues of the group exceed EUR750 million. The required information for the preparation of a master file relates to the strategies and policies followed by the group, rather than the entity. The contents of the master file must include: • the group organisational structure; • a description of the multinational enterprise’s (MNE) business activities, including the driv - ers of business profit; • the TP policies of the group; and • the geographic markets for the group’s prod - ucts and services. Additionally, the group’s intangibles must be listed, together with the MNE’s intercompany For the local file, persons that engage in con - trolled transactions with arm’s length value of less than EUR5 million per annum in the category of financing transactions or less than EUR1 mil - lion in the remaining categories in aggregation (ie, sale/purchase of goods, provision/receipt of services, financing transactions, receipt/pay - ment of intellectual property licensing/royalties, etc) are exempt from the obligation to prepare a Cyprus local file. However, they must prepare simplified TP documentation, as per Circular financial activities and tax positions. The following assumptions apply.
6/2023 on simplification measures for entities not exceeding the local file threshold. Such enti - ties may also be eligible to apply the applicable safe harbour rule set by the tax authorities. For the master file, only Cyprus tax-resident entities that are the ultimate parent or surrogate parent entity of an MNE group falling under the scope of country-by-country reporting have an obligation to prepare and maintain a master file. All other persons are exempt from this obliga - tion. It should be noted that the threshold for the requirement of local file preparation was initially set at EUR750,000 per category of transactions. This threshold was subsequently increased on 1 February 2024, with retroactive effect from 1 January 2022 onwards, following an announce - ment by the Cyprus tax authorities. The TP documentation file should be maintained by the taxpayer in electronic or paper format, and should be prepared in a generally accept - able language, preferably in English. However, the Cyprus tax authorities may request its trans - lation into Greek if necessary. The documentation file must be maintained in Cyprus for six years, and must be provided to the tax authorities within 60 days from the date that a relevant request has been received by the company or by any other company that is authorised by the company to act as its repre - sentative. It must also include a special chapter explaining the events affecting the information and data included in the documentation file and that are related to changes in the market condi - tions. The documentation file must be updated every tax year, and the update must be completed
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