The Cyprus Tax Department published the 10-year government bond yield rates as of 31 December 2025. These rates are essential for calculating the Notional Interest Deduction (NID) for the 2026 tax year.

The NID is an annual tax-deductible expense calculated on ‘New Equity’ (funds introduced into a company on or after 1 January 2015) used to generate taxable income. With  the Cyprus Corporate Income Tax (CIT) rate having increased to 15% effective 1 January 2026, the NID remains one of the most effective tools for companies to manage their tax burden, potentially reducing the effective tax rate.

The NID Formula = New Equity used for business purposes X Reference Interest Rate

The Reference Interest Rate is defined as the 10-year government bond yield of the country where the new equity is invested (as of 31 December 2025), increased by 5%.

Key Restrictions & Compliance:

• 80% Cap: The NID cannot exceed 80% of the taxable profit generated by the assets funded by the new equity.
• No Tax Loss: The NID cannot be used to create a tax loss; any excess deduction is lost and cannot be carried forward.
• Asset Matching: The “Reference Rate” used must match the asset and the country where the equity is invested.