Arm’s length Principle The arm’s length principle, i.e. the principle that conditions made or imposed in transactions between associated persons should be similar to those observed and applied between independent persons, is codified in Section 33 of the Income Tax Law. Transfer Pricing Documentation Comprehensive transfer pricing documentation requirements apply to Cyprus taxpayers as from 1 January 2022 and include:

• Maintaining a Cyprus Local File if the aggregated value of transactions with related parties per tax year exceed (or should exceed based on the arm’s length principle) €750.000 per category of transaction. The relevant categories are goods, services, IP related income, financial transactions and other transactions.

• Maintaining a Master File if the Cyprus taxpayer is either the Ultimate Parent Entity or the Surrogate Parent Entity of an MNE Group with consolidated group revenues exceeding €750 million for Country-by-Country Reporting purposes.

• The preparation and submission of a Summary Information Table (‘SIT’) by all taxpayers. The SIT contains high level information on related party transactions, such as the identity of the counterparties, their jurisdiction of tax residency and the value of the transactions.

The Transfer Pricing Documentation rules apply to all Cyprus tax resident companies, as well as permanent establishments of non-resident companies. Transfer Pricing 16 Deloitte | Cyprus Tax Facts 2023 Transfer Pricing Documentation Reporting Deadlines and Record Keeping The Local File (and Master File, if relevant) for a particular year should be prepared no later than the due date for submitting the taxpayer’s Corporate Income Tax Return for that year. Upon request by the Cyprus Tax Department, the Local File (and Master File, if applicable) should be made available within 60 days from the receipt of the relevant request by the taxpayer or by a person authorised to act as a representative of the taxpayer.

The SIT should be prepared for each separate tax year and be submitted to the Cyprus Tax Department, along with the taxpayer’s Corporate Income Tax Return for that year. Transfer Pricing Documentation Penalties Where a taxpayer has received a notice from the Cyprus Tax Department to provide the Local file and/or Master File and fails to do so within the required timeframe of 60 days, penalties ranging from €5.000 to €20.000 will apply depending on the length of the delay. In the cases where a taxpayer fails to submit a SIT, a penalty of €500 will be imposed.