On March 16, 2023, the Cyprus Tax Department made a significant announcement pertaining to the implementation of the Notional Interest Deduction (NID) on equity.
The announcement included a detailed table presenting the 10-year government bond yield rates for multiple countries, as of December 31, 2022. These rates serve as an essential benchmark for calculating the NID for the year 2023. It is important to note that the provided rates should be augmented by an additional 5% to accurately determine the NID for eligible entities (Article 9B of the Income Tax Law N.118(I)/2002, as amended). This announcement demonstrates the commitment of the Cypriot government to promote a favorable tax environment and attract both local and international businesses.
What is the Cyprus NID?
The Cyprus NID is an esteemed Cyprus tax incentive program designed to facilitate business growth and enhance the competitiveness of companies operating in Cyprus. This program allows eligible companies to deduct a notional interest expense from their taxable income, providing a valuable reduction in their corporate tax liabilities.
The NID calculation is based on a percentage of the company’s qualifying equity, taking into account the 10-year government bond yield of the country where the funds are deployed. By enabling companies to lower their taxable income without the actual payment of interest, the NID promotes increased investment in Cyprus and fosters a more favorable business environment. This initiative aligns with the government’s objective to attract and retain businesses, bolster economic development, and strengthen Cyprus’s position as an attractive destination for international investors.
Please refer to the table at the end for the 10-year government bond yield rates as of 31 December 2022 (applicable for 2023 tax year).
In recent years, Cyprus has demonstrated consistent economic growth, underpinned by a stable political climate, enticing Cyprus tax incentives, and robust international trade partnerships. These favorable conditions have not gone unnoticed, as prominent credit rating agencies have upgraded Cyprus’ credit rating, reinforcing the country’s attractiveness and credibility for prospective investors. The upgraded credit rating serves as an additional testament to the soundness of Cyprus’ economic policies, its commitment to fiscal stability, and its position as a reliable and thriving business hub in the global marketplace.
With the current rate of return on the Cyprus 10-year government bond, investors can enjoy long-term financial security and peace of mind, with the potential for capital growth.
The Aspen Trust Group extend an invitation to prospective investors to seize this exceptional opportunity and delve into the diverse array of investment possibilities Cyprus has to offer. Our knowledgeable team stands ready to provide any additional information or assistance that may be required. Please feel free to reach out to us at your convenience to initiate further discussions and explore the potential avenues for investment in Cyprus.
Thank you for your continued trust and confidence in the Aspen Trust Group.
It is recommended to visit the Cyprus Tax Department website periodically to check for the latest updates and announcements of new additions to the list.
Please visit: Tax Department | Announcements (mof.gov.cy).