On 16 March 2023, the Tax Department published the yields (rates) of the 10-year government bonds as at 31.12.2022 (link here). These rates increased by 5% and serve as the “reference rate” for the calculation of the NID for tax year 2023. The NID is a tax incentive provided to businesses that finance their operations through new equity.
To calculate the NID, businesses need to multiply their qualifying equity by the reference rate. Qualifying equity includes paid-up share capital and share premium. The resulting amount can then be deducted from the taxable income of the business.
The NID calculation formula for tax year 2023 is as follows:
NID = (Qualifying equity) x (Reference rate)
Qualifying equity = Paid-up share capital + Share premium
Reference rate = 10-year government bond rate as at 31.12.2022 + 5%
Article 9B of the Income Tax Law provides further details on the eligibility criteria and calculation method for NID.
We remain at your disposal for any further clarifications may be needed.