The Cyprus Company And Notional Interest Deduction (NID)

With effect from 1 January 2015, Cyprus tax resident companies and Cyprus permanent establishments (PEs) of non-Cyprus tax resident companies are entitled to a Notional Interest Deduction (NID) upon the contribution of New Equity employed in the production of taxable income. The new equity can be introduced in the form of paid-up share capital or share premium.

The NID was introduced mainly to harmonize the equity financing tax treatment with the debt financing tax treatment and to promote the capital- incentive investment in Cyprus. The NID is deductible in the same manner as for actual interest expense, but it does not trigger any accounting entries since it is a "notional" deduction.