Cyprus issues guidance on notional interest deduction

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September 2016

Overview

Since 2015, Cyprus tax law has provided for a tax deduction on new corporate equity through the notional interest deduction (NID) regime, in an effort to further align the tax treatment of equity and debt financing. 

In July 2016, the Cyprus tax authorities (CTA) issued Circular 2016/10 (the Circular) to further clarify the definition of relevant terms and provide guidance on the NID’s practical application. 

In summary, the Circular provides:

  • further guidance on the definitions of ‘new equity’ and ‘NID interest rate’ 
  • the introduction of scheduling for the purpose of applying the 80% limitation 
  • further guidance on relevant anti-avoidance provisions andpractical numerical examples for application of the NID.

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Suchi Lee

Global International Tax Services Leader, PwC US

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