In July 2015 the Cyprus government introduced a notional interest deduction ("NID") on new equity capital (paid-up share capital and share premium) injected into companies and permanent establishments of foreign companies on or after 1 January 2015 for the purpose of financing business assets, calculated by applying a reference rate to the new equity. The reference rate is the higher of the 10-year government bond yield of Cyprus or the country in which the assets funded by the new equity are utilized, in each case plus three percentage points. The bond yield rates to be used are as at 31 December of the year preceding the year of assessment.
Earlier this year the Cyprus Tax Department announced the 10-year government bond rates at 31 December 2014, which will be used as the basis for the NID for the 2015 tax year, for Cyprus, Germany, India, Romania and Russia. It subsequently announced the corresponding rates at 31 December 2015, as well as a rate for Ukraine, which will be used as the basis for the NID on capital introduced during 2016. The Tax Department has now announced rates at 31 December 2015 for four further countries, namely the Czech Republic, Latvia, Poland and the United Arab Emirates, on which the NID on capital introduced in 2016 will be based. The NID for capital introduced during 2015 to finance assets used in any of these countries or in Ukraine will be based on the rate for Cyprus.
For completeness all the bond rates announced so far are listed below:
|
31 December |
|
|
2014 |
2015 |
Cyprus |
5.037 |
3.685 |
Czech Republic |
- |
0.499 |
Germany |
0.540 |
0.568 |
India |
7.860 |
7.758 |
Latvia |
- |
1.104 |
Poland |
- |
2.937 |
Romania |
3.570 |
3.703 |
Russia |
13.730 |
9.570 |
Ukraine |
- |
9.622 |
United Arab Emirates |
- |
7.490 |
Based on the above, the NID rates for the 2015 and 2016 tax years are as follows:
|
2015 |
2016 |
Cyprus |
8.037 |
6.685 |
Czech Republic |
8.037 |
6.685 |
Germany |
8.037 |
6.685 |
India |
10.860 |
10.758 |
Latvia |
8.037 |
6.685 |
Poland |
8.037 |
6.685 |
Romania |
8.037 |
6.685 |
Russia |
16.730 |
12.570 |
Ukraine |
8.037 |
12.622 |
United Arab Emirates |
8.037 |
10.490 |
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