Notional Interest Deduction (NID)
- As per the provisions of the recently voted legislation a Cyprus company is entitled to a Notional Interest Deduction (“NID) on “new equity”.
- New equity introduced to a company as from January 1, 2015 in the form of paid-up share capital or share premium.
- The new equity can be represented by assets other than cash.
- NID Deduction = New equity x NID interest rate.
- NID interest rate = Yield of 10-year government bonds +3% premium
- The NID deduction cannot exceed 80% of the taxable profit as calculated before NID
- Therefore a Newly Established Fund (AIF), could potentially qualify for the Notional Interest Deduction resulting to tax optimization.
- Nonetheless, the proposed structure should be carefully examined from a tax perspective in order to assess the availability of the NID regime in view of the anti-avoidance clauses introduced in the NID regime.