Introduction to Notional Interest Deduction
(NID)
The Notional Interest Deduction (NID) is a tax incentive
introduced by Cyprus in 2015 to encourage businesses to finance
operations through equity rather than debt. It allows companies to
claim a notional deduction on taxable profits when raising capital
via new equity, offering a tax benefit similar to interest
deductions on debt financing.
By lowering the effective tax rate, NID enhances Cyprus's
appeal as a business destination, promotes financial stability, and
ensures a neutral tax treatment between debt and equity
financing.
Legal Framework of NID
The NID is governed by Article 9B of the Cyprus Income Tax Law
(ITL) and applies to:
