Notional Interest Deduction (NID)
A tax incentive for equity financing and debt restructurings
Debt has traditionally been a tax efficient way of financing business operations. However, tax developments are such that businesses financing their operations through back to back debt, may be subject to certain risks and challenges.
In light of the above and in an effort to reduce the discrepancy in the tax treatment between debt and equity financing, Cyprus introduced a tax incentive, namely the “Notional Interest Deduction” or “NID”.
The NID enhances the tax benefits of financing business operations through equity and offers a tax efficient alternative to debt financing.
In November 2020, the EU Code of Conduct Group (Business Taxation) and ECOFIN, confirmed that this regime has been assessed as "not harmful" since its introduction as of 1 January 2015.
Our team of professionals is at your disposal to discuss with you the relevant tax implications upon issuing new equity and/or restructuring existing financing arrangements.