Cyprus Reference Rates for Notional Interest Deduction 2022
The 10-year government bond yield rates for a number of countries as of 31 December 2021 were released by the Cyprus Tax Department on February 3, 2022. These rates can be used as reference rates to determine the Notional Interest Deduction (NID) for the year 2022 after being increased by 5%.
Article 9B of the Income Tax Law of 2002, as amended, governs the application of NID, which provides for a notional interest deduction for tax purposes on new equity capital introduced into Cyprus resident companies (or permanent establishments of foreign companies in Cyprus) as of 1 January 2015, provided the new equity funds are used for business purposes.
In brief, the reference rate for the year 2022 is equal to the 10-year government bond yield as at 31 December 2021 of the country in which the new equity has been applied, increased by 5%. The NID reference rate results in a notional interest expense that can reduce the relevant taxable profit. The NID is restricted to 80% of taxable profits generated by the application of the new equity.
For more information please contact us.
The 2022 reference rates that have been announced by the Cyprus Tax Office are set out on the table below: