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Notional Interest Deduction (NID)
The Notional Interest Deduction (NID) is a tax incentive provided by the Cyprus government to companies that invest in new tangible and intangible assets. The NID was introduced in 2013 as part of the Cyprus tax reform to encourage investment and boost economic growth. The NID allows companies to deduct a notional interest amount from their taxable income based on the value of their qualifying assets. The notional interest rate is set at the benchmark interest rate of the European Central Bank plus a spread of 2.5%. The NID is calculated on the basis of the average investment made during the tax year and can be claimed for a period of 8 years.
Eligible assets for the NID include new tangible assets such as machinery and equipment, as well as intangible assets such as patents, trademarks, and copyrights. The NID can also be claimed on investments in Research & Development (R&D) activities and on the acquisition of intellectual property rights.
The NID is a valuable tax incentive for companies that are looking to invest in new assets and expand their operations. The NID can help companies to reduce their tax burden and improve their cash flow, which can be used to fund further investments. The NID also helps to level the playing field for Cyprus companies by providing them with a competitive advantage over companies in other countries.
The NID can be claimed in conjunction with other tax incentives such as the Cyprus Intellectual Property Box Regime, which provides a reduced tax rate of 2.5% on income derived from certain intellectual property rights.
It is important to note that the eligibility criteria for NID and the specific rules for its calculation are subject to change and it's always recommended to seek professional advice to ensure compliance with the most up-to-date regulations.
In conclusion, the Notional Interest Deduction is a valuable tax incentive for Cyprus companies that invest in new tangible and intangible assets. It can help companies to reduce their tax burden, improve their cash flow, and gain a competitive advantage over companies in other countries. Companies that are considering investing in new assets should take advantage of the NID and other tax incentives to maximize the benefits of their investment.