As we have reported previously a notional interest deduction on “new equity” has been introduced in Cyprus as from 1 January 2015.
The Cyprus Tax Department issued on 18 September 2017 a notification announcing the reference interest rates of the 10-year government bonds as at 31 December 2015 and 2016 for Italy, Kazakhstan and Greece. These are as follows:
| Country | Interest Rates | |
| 31/12/2016 | 31/12/2015 | |
| Greece | 8,361% | 9,639% |
| Italy | 1,930% | 1,847% |
| Kazakhstan | 4,204% | 5,311% |
It is reminded that the notional interest deduction is calculated based on a ‘reference interest rate’, which is equal to the yield on the 10-year government bond of the country where the new funds are/will be invested, plus 3%, with the minimum rate being the yield on the 10-year government bond of Cyprus plus 3%.
The minimum reference interest rate to be used for the tax year 2017 is 6,489%, being yield of 3,489% on the 10-year Cypriot government bond plus 3%.