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Notional interest deduction, BEPS and tax structuring
In 2015, Cyprus introduced the Notional Interest Deduction (NID) in its tax law. The NID is notional interest deduction on new equity which can be set against taxable income generated by the company as a result of the funds from the new equity. Taxand Cyprus looks into this matter further.
NID is equal to the interest yield of the 10 year government bond yield of the country in which the new equity is invested, increased by 3% (the minimum rate being the yield of the Cyprus 10-year government bond increased by 3 percentage points). The bond yield rates to be used are those valid on December 31 of the year preceding the assessment year.
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It is evident that the structures used for Cyprus financing companies are being outdated and that immediate action is required for such structures to be revised in light of recent changes. Our team of skilled professionals can help you examine the potential effect of all existing and upcoming tax law changes on your structures and examine necessary changes in order to update them.