The Notional Interest Deduction (NID) with retrospective effect as from 1st January 2020 rules have been amended by the Cyprus Income Tax (Amending) Law 66(I)/2020.
The new Law provisions that the NID Reference Rate is defined as the interest rate of the 10 year government bond yield of the country in which the new equity is invested (as published annually) increased by 5% instead of 3% that was applicable in prior years.
Introduction
On the 5th of April 2019, the House of Representatives approved the proposed legislation (the Law) implementing the provisions of the European Union Anti-Tax Avoidance Directive (ATAD or Directive). The new Law will come into force once it is published in the Official Gazette of the Republic. The provisions of the Law shall be effective as of 1 January 2019 (i.e. from the tax year 2019 onwards).
The Law introduces the below:
The second phase of the implementation of the Directive concerning the exit taxation provisions and the Hybrid mismatch rules will be effective as of 1 January 2020.
The first implementation of the ATAD Law impacts only Cyprus Corporate Income Tax payers and more specifically Cyprus Tax Resident Companies and Cyprus Permanent Establishments (PEs) of non-Cyprus Tax Resident Companies.
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