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The Cyprus taxation law on Cyprus Notional Interest Deduction (NID)

Equity: New equity can be introduced either in the form of cash or in kind. Where new equity will be introduced in the form of assets (in-kind), the sum of these may not exceed the market value. Assets must be fully documented. Notional interest deduction (NID) will be given on new capital (share capital and share premium to the extent that they have been paid) issued from 1st January 2015.

Interest: Notional interest deduction (NID) was initially calculated on the amount of new share capital/share premium the same way as with interest on loans. The rate of notional interest deduction (NID) is defined as the 10-year government bond yield (at December 31 of the year preceding the tax year) of the country in which the new equity is invested, increased by 3% and having as a lower limit the 10 year Cyprus government bond increased by 3%.


From 1 January 2020, the annual interest rate for the purposes of Notional Interest Deduction - NID will be the ten-year government bond of the country in which the funds are invested in the activities of an entity plus 5% instead of 3% There is no minimum interest rate therefore, in the case of countries that have a lower rate than the Cypriot one then this lower rate should be used. The Cypriot interest rate should be used only in cases where:

  •  the investment is made in Cyprus and 

  • the country in which the investment took place has not issued a government bond.

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