Cyprus offers a Notional Interest Deduction (NID) on new equity introduced into companies after 1 January 2015. This regime enhances tax neutrality between debt and equity financing and significantly reduces the effective corporate tax rate.
Companies can claim a notional interest deduction on new equity (including share capital and share premium) as if it were interest-bearing debt.
The NID can reduce up to 80% of taxable profit generated from activities financed by the new equity, leading to an effective tax rate as low as 2.5%.
The notional interest rate is based on the yield of Cyprus government bonds, increased by a premium of 5%, varying by currency and jurisdiction.
To qualify, the equity must be used for business purposes and economic substance must be demonstrated.
We assist clients with eligibility assessment, NID calculation, documentation, and optimal structuring to benefit from this regime.
