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Reference rates for Notional Interest Deduction for 2018

Article 9(B) of the Income Tax Law of 2002 as amended provides for a notional interest deduction for tax purposes 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 to finance 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 uplifted by three percentage points. The bond yield rates to be used are as at 31 December of the year preceding the year of assessment.

The Cyprus Tax Department has recently announced the 10-year government bond yields at 31 December 2017, which will be used as the basis for the notional interest deduction for the 2018 tax year, for the countries below. For countries whose bond yield is lower than that of Cyprus the reference rate will be the Cyprus rate of 4.881 per cent.

  Bond yield

at end-2017

Reference rate for 2018
Austria 0.563 4.881
Canada 2.079 5.079
China 4.268 7.268
Croatia 2.453 5.453
Cyprus 1.881 4.881
Czech Republic 1.650 4.881
Estonia 0.715 4.881
France 0.780 4.881
Germany 0.423 4.881
Greece 4.073 7.073
Hungary 2.031 5.031
India 7.571 10.571
Italy 2.005 5.005
Luxembourg 0.637 4.881
Netherlands 0.501 4.881
Norway 1.579 4.881
Poland 3.385 6.385
Republic of Ireland 0.811 4.881
Romania 4.314 7.314
Russia 7.590 10.590
Russia (USD) 3.822 6.822
Serbia 5.968 8.968
Slovakia 0.815 4.881
Slovenia 0.843 4.881
South Africa 8.780 11.780
Spain 1.558 4.881
Sweden 0.540 4.881
United Kingdom 1.188 4.881
United States of America 2.406 5.406

 

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