On 3 February 2022, the Cypriot Tax Department issued an announcement which lists the 10-year government bond yield rates as at 31 December 2021 for a number of countries (listed on the table below) with respect to the Notional Interest Deduction (NID) on equity. These yield rates are to be used to determine the reference interest rate for claiming NID for the 2022 tax year.
The key NID provisions and the applicability of the 10-year government bond yield rates are summarized below.
Notional Interest Deduction
As of 1 January 2015, Cyprus tax resident companies (as well as foreign companies with permanent establishments in Cyprus), which carry on a business, are entitled to claim a NID on their equity capital introduced on or after 1 January 2015.
The NID is deducted from the taxable income of the company for the relevant tax year (subject to any restrictions) for the period of time during which the equity is used by the company for the carrying on of its activities. The NID is subject to a number of conditions, including a taxable income limitation.
The NID equals the multiple of the “reference interest rate” (as defined below) and ‘’new equity.’’
“Reference interest rate” means the 10-year government bond yield as at 31 December of the year preceding the tax year of the country in which the new equity is invested increased by 5%.
10-year government bond yield rates as at 31 December 2021 (applicable for 2022 tax year)
|Country||Yield rate||Country||Yield rate|
|Argentina||3,508||Jordan ($ US)||5,631|
|Belarus ($ US)||9,785||Lebanon||N/A*|
|Bermuda ($ US)||2,376||Luxembourg||0,129|
|British Virgin Islands||N/A*||Morocco||2,239|
|Dubai (€)||N/A*||Russia ($ US)||1,994|
|Dubai ($ US)||2,533||Saudi Arabia||2,932|
|Egypt ($ US)||7,570||Singapore||1,638|
|Ireland||0,237||Ukraine ($ US)||8,902|
|Isle of Man||1,502||United Arab Emirates||N/A*|
|Israel ($ US)||1,919||Vietnam||2,066|
* There are currently no government bond yield rates for the above indicated countries.
For any queries you have with regards to the announcement Kyriakides, Savvides & Associates Ltd is always at your disposal.