No, there is no obligation to include Category's "B" controlled transactions in the Cyprus Local File.

Only, the controlled transactions of a category which cumulatively exceed or shall exceed €750.000 on the basis of the arm's length principle during a tax year must be documented and analyzed in the Cyprus Local File.

In this specific example, it will be Category's "A" controlled transactions only.

The threshold is determined by reference to the total rental income on the basis of the arm's length principle in a tax year.

Yes, the threshold is based by reference to the absolute values of the controlled transactions for each category occurring in a tax year.

For example, if total purchases and total sales amount to €400.000 and €500.000 respectively, the cumulative amount in this category is € 900.000. Thus the threshold in this category has been exceeded.

The Cyprus Local File and Summary Information Table are prepared with respect to the tax year.

Financial Guarantees should be reported under the category "Financial Transactions".

A Benchmarking study should be prepared when an intra group loan is initiated and updated when:

(i) new loans are provided or received by the company, or

(ii) significant terms of the existing loans change or amended, or

(iii) the functional profile of the company changes, or

(iv) the market and economic conditions change significantly (if applicable).

The above list is indicative and not exhaustive. Further guidance is provided in the OECD TP Guidelines.

Please note that in accordance to article 33(10) of the ITL, the master file (where applicable) and the local file shall be updated every tax year.

It is the responsibility of the taxpayer to complete the Summary Information Table. The Summary Information Table shall be submitted by the Statutory Auditor or Tax Consultant.

The Back to Back circular was abolished as from 01/01/2022.

The threshold in the category of loan financing transactions is determined only by reference to the loan principal including interest charged but not paid.

The maximum loan balance (i.e. only the loan principal including interest charged but not paid) during the tax year should be used to determine the threshold in the respective tax year and be reported in the Summary Information Table.

No, provided the company which is granting the loans or any other monetary facilities including cash withdrawals to its directors or to its shareholders who are individuals or their spouses or to their relatives up to and including the second degree of kinship does not have as a taxable activity the provision of financing.

In this specific case only, such balances should not be taken into account for the purposes of assessing whether the threshold of €750.000 has been exceeded in the category of financing activities and as such should not be reported in the Summary Information Table. No documentation with respect to these specific transactions in the local file is required. .

In the case of Company A only (i.e. the Borrower), the transaction shall not be documented in the Cyprus local file and it shall be excluded from the Summary Information Table to the extent that the interest incurred does not constitute a tax deductible expense in accordance to the provisions of articles 11(15) and 11(16) of the Income Tax Law L. 118 (I)/ 2002 and any other related Tax Circular that is in force.

Yes, Circular 06/2023 is applicable to the transactions in Category “B” in that tax year and thus the taxpayer should either:
a) prepare simplified transfer pricing documentation with the contents as described in the Circular 06/2023 or
b) opt for a safe harbor and maintain the prescribed supporting documentation in respect of the use of the safe harbor provided that the controlled transactions in Category “B” belong to one of the subcategories of transactions for which a safe harbor is available under the circumstances permitted in the Circular 06/2023.
Please refer to Circular 06/2023 which was published on 6th July 2023 for further details.

Yes.
All persons as defined in article 33(7) of the Income Tax Law need to complete and submit the Summary Information Table of Controlled Transactions as long as controlled transaction(s) arise within a tax year and irrespective of the value of the said controlled transaction(s).