Amendments to the NID regime Cyprus
Amendments in the Cyprus Notional Interest Deduction (NID) rules.
On 16/06/2020 the amendments on the NID rules were published in the official gazette of the Republic of Cyprus. The major amendments are as follows:
- From 1 January 2020 the annual NID rate is the 10-year government bond of the country that the funds are invested in the business of a company plus 5% instead of 3% (which applied up to 31/12/2019).
- The use of the Cyprus rate as a minimum is abolished. Therefore, in the case of countries that have a lower rate than Cyprus then that lower rate should be used. The Cyprus rate should be used only (i) in case that the investment is performed in Cyprus and (ii) in case that the country that the investment was performed has not issued a government bond.
As a result of the above on the 2020 list of rates as issued by the Tax department should be read as follows:
|A/A||COUNTRY||10 year government bond rate for 2020 – as issued by Tax office||NID reference rate +5%|
|7||British Virgin Islands||N/A||5,621|
|27||Isle of Man||1,712||6,712|
|61||United Arab Emirates||N/A||5,621|
In case of N/A the Cyprus rate applies.
The increase of the reference rate to 5% is expected to affect positively all Cyprus companies using NID for 2020 since all relevant rates are above 3,536% that was the minimum rate applied under previous provisions of the law. Therefore, companies should amend their provisional tax computations and tax payments for 2020 accordingly.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
Our tax specialists are at your disposal should you require any further information or clarifications and for further advice on the subject matter.