The Cyprus Tax Department has published the 10-year government bond yields as of 31 December 2025, which are required for determining the Notional Interest Deduction (NID) for the 2026 tax year.
The NID provides companies with an annual tax-deductible allowance on ‘New Equity’—capital introduced into a company on or after 1 January 2015—used to generate taxable profits. Following the increase of the corporate income tax rate to 15% from 1 January 2026, the NID remains an important tool for businesses seeking to optimize their effective tax rate.
| Calculation | Description |
|---|---|
|
NID |
New Equity used for business purposes × Reference Interest Rate |
The Reference Interest Rate is defined as the 10-year government bond yield of the country where the new equity is invested (as of 31 December 2025), increased by 5%.
Key Considerations:
- 80% Limit: The deduction cannot exceed 80% of the taxable profit generated from the assets funded by the new equity.
- No Tax Loss Creation: NID cannot result in a tax loss; any excess deduction is forfeited.
- Asset-Location Match: The applied reference rate must correspond to the asset and country in which the equity is actually invested.
As always, M. Target Group specialists remain at your disposal should you require any further information, clarification or professional assistance.
