Notional Interest Deduction on New Capital – 2019


The Cyprus Tax Department has now announced the 10-year government bond yields as of 31 December 2018, which will be used as the basis for the Notional Interest Deduction (NID) for the tax year 2019 (original announcement in Greek).

Note: NID is a new tax incentive introduced back in 2015. Under this new extremely positive legislative initiative it is now possible for a company to claim a NID on the new capital introduced into the company. NID can be used as a tax optimization option for financing and related arrangements.

You may refer to the reference interest rates below as published by the Tax Department:

Country  10 Year Bond Yield  Country  10 Year Bond  Yield 
Cyprus  2.302  Kazakhstan N/A
Austria  0.484 Latvia 1.029
Armenia  6.385 Belarus (USD$)  7.226
Bulgaria 0.966 Luxembourg 0.522
BVI  N/A Mauritius  5.380
France 0.705 Norway 1.754
Germany 0.284 South Africa 9.206
Switzerland 0.197 Holland  0.383
Greece 4.346 Hungary 2.971
UAE N/A Ukraine (USD$) 10.780
United Kingdom  1.275 Poland  2.812
USA   2.685 Romania  4.811
India 7.261  Russia  8.720
Ireland 1.166  Russia (USD$)  5.020
Spain  1.413 Serbia  4.722
Italy 2.739 Slovakia  0.789
China 3.261 Croatia  2.415
Slovenia 1.166 Czech Republic   1.884
Sweden
0.457  Hong Kong 1.946
Canada  1.965 

Based on the Tax Department’s notification, the minimum reference interest rate to be used for NID purposes for the tax year 2019 should be 5,302% (that being 2,302% yield on the 10-year Cypriot government bond plus 3% as dictated by Article 9B of the Income Tax Law).

Please see Cyprus – Notional Interest Deduction on New Capital for more details.

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