Notional Interest Deduction – N. Constantinou & Co Audit Ltd | Cyprus Audit, Tax, Company incorporation, Consulting https://www.nconstantinou.com Cyprus Audit, Tax, Company incorporation, Consulting, Accounting Thu, 10 Sep 2020 12:05:24 +0000 en-US hourly 1 https://wordpress.org/?v=6.8.5 https://www.nconstantinou.com/wp-content/uploads/2020/01/cropped-Logo-32x32.jpg Notional Interest Deduction – N. Constantinou & Co Audit Ltd | Cyprus Audit, Tax, Company incorporation, Consulting https://www.nconstantinou.com 32 32 Amendments to Notional Interest Deduction (NID) https://www.nconstantinou.com/amendments-to-notional-interest-deduction-nid/ Thu, 10 Sep 2020 12:05:24 +0000 https://www.nconstantinou.com/?p=947 On 16 June 2020, the NID provisions have been amended as follows:

Reference rate

The reference rate is the yield of the 10 year government bond as at 31 December of the year preceding the tax year the NID is claimed, of the country where the new equity if employed OR invested plus 5%. There is no minimum reference rate.

 

New equity

This is defined as equity introduced into the business on or after 1 January 2015.

As from 1 January 2021, the NID can no longer be claimed on equity arising from the capitalization of pre-existing reserves.

 

NID cap

In accordance with the pre-amended provisions, the NID is capped at 80% of taxable profits. The amending law clarifies that for the purposes of calculating the NID cap, the relevant taxable profits are those arising from the employment of the new equity so that the NID can only be claimed against such profits.

The amendment also clarifies that the cap applies separately to the taxable profits derived from each business asset that is financed by the new equity.

]]> Tax treatment of non-refundable capital contributions to companies who are not Cyprus tax residents https://www.nconstantinou.com/tax-treatment-of-non-refundable-capital-contributions-to-companies-who-are-not-cyprus-tax-residents/ Tue, 11 Dec 2018 13:39:52 +0000 http://www.nconstantinou.com/?p=885 On 3 September 2018, the Cyprus Tax Department issued the circular EE-25 in order to provide guidance regarding the tax treatment of non-refundable capital contributions (NRCC) to companies who are not Cyprus tax residents.

The circular states that NRCC will not trigger Article 33 of the Income Tax Law, provided that the following conditions are met:

  • The contributor does not have the legal right, at anytime, to request the repayment of the contribution
  • The repayment of the contribution can be made only by capital reduction or liquidation of the receiver
  • The repayment of the contribution is made 2 years after the end of the year in which the contribution was made
  • The contributor has an active participation in the capital of the receiver
  • The receiver does not claim Notional Interest Deduction (NID) relating to the NRCC

The circular is applicable from 1 January 2017

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