The Cyprus Tax Department announced on 16 March 2023 the 10-year government bond yield rates for a number of countries as at 31 December 2022. These rates, when increased by 5%, can be used as reference rates for calculating Notional Interest Deduction (NID) for the year 2023.
The application of NID is governed by Article 9B of the Income Tax Law of 2002 as amended, which provides for a notional interest deduction for tax purposes on new equity capital injected into Cyprus resident companies (or permanent establishments of foreign companies in Cyprus) as from 1 January 2015, provided the new equity funds are used for business purposes.
In brief, the reference rate for year 2023 is equal to the 10-year government bond yield as at 31 December 2022 of the country in which the new equity has been applied, increased by 5%. When applied as per the relevant provisions, the NID reference rate results in a notional interest expense that can reduce the relevant taxable profit. The NID is restricted to 80% of taxable profits generated by the application of the new equity.
More on NID can be found on our related detailed information sheet by clicking here.
The 2023 reference rates that have been announced by the Cyprus Tax Office are set out on the table below.
Click for NID reference rates of previous years: 2017, 2018, 2019, 2020, 2021, 2022.
