notional interest cyprus consultancy

Notional Interest Deduction

  • Case: LOAN RESTRUCTURING OPPORTUNITY THROUGH NID
  • Country: UKRAINE COMPANY “LOAN RESTRUCTURING OPPORTUNITY THROUGH NID

back-to-back loan arrangement

For example, instead of engaging the Cyprus Company through back-to-back loan arrangement, one can take advantage of the NID provisions and grant out a loan through own funds that were introduced in the share capital of the Cyprus Company.

Cyprus resident Companies

Cyprus resident Companies are entitled to a Notional Interest Deduction (NID) of up to 80% of their taxable income on qualifying new equity. Qualifying new equity includes share capital of any class and share premium issued and settled after 1 January 2015 paid either in cash or in kind.

Effective Tax

The above provision, apart from reducing the effective tax of the Cyprus Company by up to 80% thereby decreasing the effective tax rate to as low as 2.5% can also allow for the Cyprus Company to be the beneficial owner of income. Especially in the cases where loans are granted by the Cyprus Company the resulting tax charge can be as low or even lower than in the case of using thin spreads (back-to-back arrangement).

Cyprus Cooperate Services Simplified

At MariCorp we target to simplify Corporate Services as a whole and offer our clients a straightforward and simple solution.

Tax Computation:

Scenario: A Cyprus resident trading/financing Company issues new capital comprising of 1000 shares, with a nominal value of €1 each at a premium of €999 per share (total new equity €1.000.000). The funds are utilized in the business and generate income of i.e. €200.000. Reference Rate for year 2016 as published by the Cyprus Tax Department for funds employed in i.e. Ukraine at 9.622% (NID rate).

Income from application of new equity 200.000€
Less: Cost of Sales 100.000€
Less: Administration expenses 30.000€
Profit before claiming NID: 70.000€
Less: NID 0€
Refore restriction: 96.220€
Restricted 80% 56.000€
Taxable profits 14.000€

Effective Tax = 2.5% (€1.750/€70.000)

marinos marinou

Marinos Marinou

Graduated from Liverpool John Moores University in 2011. Became a member of the Institute of Chartered Accountants of England and Wales (ICAEW) in 2015. Currently undergoing Certified Fraud Examiner (CFE) Level 1. Member of the International Tax Planning Association (ITPA).

 

Marinos is specialized in International Tax Planning, Advanced Consulting, and Corporate Services.

Contact us

Where to find us:

81, Griva Digeni Avenue, MARINOS Court, 2nd floor, office 203

P.O. BOx  42656, P.C. 6501, 6043

Larnaca – Cyprus

Tel: +357 24663402 , Fax: +357 24663409

E-mail: admin@cyprusconsultancy.com

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