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ARTICLE · 28 SEPTEMBER 2016

Practical Application Of The New Cyprus Notional Interest Deduction

Elias Neocleous & Co LLC
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The NID is a deduction from taxable profit, calculated by applying a reference rate to the new equity.

CyprusWealth Management
Alexandra Spyrou
Alexandra Spyrou
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As reported in a July 2015 issue of Global Tax Weekly,1 Law 116(I) of 2015 amending the Income Tax Law of 2002 introduced a notional interest deduction ("NID") on new equity capital (paid-up share capital and share premium) injected into companies and permanent establishments of foreign companies on or after January 1, 2015, for the purpose of financing business assets and operations.

The Fundamentals Of The NID

The NID is a deduction from taxable profit, calculated by applying a reference rate to the new equity. The reference rate is the higher of the ten-year government bond yield of Cyprus or the country in which the assets funded by the new equity are employed, with an uplift of three percentage points. The bond yield rates to be used are those applying on December 31 of the year preceding the year of assessment.

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