On 12 February 2020, the Cypriot Tax Department (CTD) announced the 10-year government bond yield rates as at 31 December 2019 for a number of countries (set forth in the table below) with respect to the Notional Interest Deduction (NID) on equity. These yield rates are to be used to determine the reference interest rate for claiming NID in respect of the 2020 tax year.
The key NID provisions and the applicability of the 10-year government bond yield rates are summarized below.
Notional Interest Deduction
As of 1 January 2015, Cyprus tax resident companies (as well as foreign companies with permanent establishments in Cyprus), which carry on a business, are entitled to claim a NID on their equity capital introduced on or after 1 January 2015.
The NID is deducted from the taxable income of the company for the relevant tax year (subject to any restrictions) for the period of time within the tax year during which the equity belongs to the company and is used by that company for the carrying on of its activities.
The NID will equal the multiple of the “reference interest rate” (as defined below) and ‘’new equity.’’
“Reference interest rate” means the yield rate (not the coupon rate) as at 31 December of the year preceding the tax year of the 10-year government bond of the country in which the new capital is invested increased by 3%. However, the reference interest rate cannot be lower than the yield rate of the 10-year government bond of Cyprus increased by 3%.
10-year government bond yield rates as at 31 December 2019 (applicable for 2020 tax year)
British Virgin Islands
Isle of Man
United Arab Emirates
* There are currently no government bond yield rates for the above indicated countries.
For additional information with respect to this Alert, please contact the following: