Notional Interest Deduction (NID)

INTRODUCTION

During the recent years there have been several key developments around the world in relation to the application of the double tax treaties and international taxation in general. These changes have been primarily driven by the OECD through the BEPS initiative which came about after the 2008 financial crisis, but have since been transposed into most local legislation, as well as case law, which set a precedence of clear rules as to when any benefits under a double tax treaty can be denied or granted.

In the context of financing transactions, which have historically been a common area of abuse and aggressive tax planning, and in light of older structures involving so called back-to-back loans especially in Cyprus after the 2013 banking crisis, the need to find a solution for robust financing arrangements able to withstand these new challenges arose.