The application of NID is governed by Article 9B of the Income Tax Law of 2002 as amended, which provides for a notional interest deduction for tax purposes on new equity capital injected into Cyprus resident companies (or permanent establishments of foreign companies in Cyprus) as from 1 January 2015, provided the new equity funds are used for business purposes.
In brief, the reference rate for 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%. When applied as per the relevant provisions, 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.
More on NID can be found on our related detailed information sheet by clicking here.