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HOME  /  NEWS  /  AMENDMENT TO THE CYPRUS NOTIONAL INTEREST DEDUCTION (NID) RULES

BRIEFINGS

Amendment to the Cyprus Notional Interest Deduction (NID) rules

The Cyprus NID rules were first introduced in the Cyprus Tax Law in 2015. According to these rules, tax resident companies & Cyprus permanent establishments (PE) of non-tax resident companies are entitled to NID upon the introduction of new equity employed in the production of taxable income.

The NID is equal to the new equity multiplied by the relevant reference rate. Up until the amending law, the NID reference rate was defined as the interest rate of the 10-year government bond yield of the country in which the new equity is invested or that of Cyprus (as at 31 December of the previous tax year), whichever is the highest, increased by 3%.

As from 1 January 2020 the NID reference rate is defined as the interest rate of the 10 year government bond yield of the country in which the new equity is invested increased by 5%. Thus, the interest rate of the Cyprus 10-year government bond will no longer be used as comparison. It will only apply in the event where the country in which the new equity is invested, has not issued any government bond up until 31 December of the year prior to the year in question.