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Situation in Cyprus
As you are probably aware from the international media, on the 16th of March 2013, an agreement has been reached by the Member States of the Eurozone, for granting financial assistance to the Republic of Cyprus. Financial assistance up to an amount of €10 billion is to be granted to cover fiscal needs, the restructuring of the banking system and for the support of the economy in general.
As a result of intense pressure from the European Central Bank, the European Commission and the International Monetary Fund, the Cypriot authorities reluctantly agreed to impose an one-off levy on the deposits. The level, as agreed at the Eurogroup level, is 6.75% on deposits up to €100,000 per account, and 9.9% on deposits over €100,000.
The levy will be imposed on the credit balance of deposits as of Friday,15th March 2013 and applies to all corporate and physical person’s accounts, residents or non residents at Cypriot banks and foreign banks operating in the island.
The compensation offered to depositors will be in the form of shares in the banks and provided that the deposits are kept in the banking institutions for a period of at least two years, the depositors will be given government bonds secured against the potential income streams from the exploitation of the natural gas reserves discovered in the Cyprus territorial waters and jointly exploited with US, French and Italian Oil companies.
The banks have been closed for the Monday banking holiday and will remain closed today (19 March) and tomorrow (20 March) pending a decision by parliament to approve the levy.
The Parliament is schedule to meet today at 6.00p.m. to discuss the bill. In the meantime negotiations are taking place for improving the conditions.
OTHER MEASURES FOR CYPRUS COMPANIES ONLY
There will be an increase on corporate tax from 10% to 12.5% on the taxable income. Gains arising from the disposal of financial instruments as well as dividends received from overseas subsidiaries or branches remain exempt from tax.
Increasing the taxation of interest income received from bank deposits and notice accounts from 15% to 20% - 25%.
We will be providing you with further information on the developments and should you have any questions or require any service in Cyprus or elsewhere please feel free to contact us.
Disclaimer: The information above is according to an official announcement of the Ministry of Finance on 18 March 2013 and may change as the negotiations are continuing. This information is for general information and should not be relied on for any commercial or investment decisions.