‘Mini’ tax reform in Cyprus
Cyprus introduced a Notional Interest Deduction (NID) regime on qualifying corporate equity on 1 January 2015. The aim is to reduce corporate debt and encourage new equity (share capital and share premium) through an annual tax allowable NID. The NID interest rate is calculated using the yield on ten-year government bonds (as at 31 December of the prior tax year) of the country, where the funds are employed in the business of the company, plus a 3% premium.
The NID is tax-deductible, like traditional interest expenses, and cannot exceed 80% of the taxable profit. If the maximum NID is available, the effective corporate tax rate is as low as 2.5%.
As of 16 July 2015, non-Cyprus domiciled individuals are exempt from taxation on personal investment income, including dividend and interest income. Individuals who are non-Cyprus domiciled but are considered Cyprus residents for tax purposes (those who reside in Cyprus for more than 183 days in any calendar year) are exempt from any Cyprus taxes on dividend and interest income.
For more information, contact:
Nexia Poyiadjis, Cyprus
T: +357 22 456111