On 18 March 2026, the Cypriot Tax Department issued an announcement that lists the 10-year government bond yield rates as of 31 December 2025 for a number of countries with respect to the Notional Interest Deduction (NID) on equity. These yield rates should be used to determine the reference interest rate for claiming the NID for the 2026 tax year.

The 10-year government bond yield rate of each country is in local currency unless otherwise denoted in the relevant table.

The key NID provisions and the applicability of the 10-year government bond yield rates are summarized below.

Notional Interest Deduction

As of 1 January 2015, Cyprus tax-resident companies (as well as foreign companies with permanent establishments in Cyprus) are entitled to claim an NID on their equity capital introduced on or after 1 January 2015 (referred to as "new equity").

The NID is deducted from the company's taxable income for the relevant tax year (subject to any restrictions) for the period of time during which the company used the equity in carrying on its activities. The NID is subject to a number of conditions, including a taxable-income limitation.

The NID equals the multiple of the reference interest rate and new equity. "Reference interest rate" means the 10-year government bond yield of the country in which the new equity is invested, as of 31 December of the year preceding the tax year, increased by 5%.

Implications

Affected entities should use the published bond yield rates to accurately determine their NID claims for 2026 and ensure compliance with Cyprus tax regulations.