In an effort to assist the Cyprus-based Financial Institutions tackle the Non-Serviced loans, the Cyprus Government has introduced a scheme which offers various tax breaks and/or reduced fees and levies payable to governmental authorities when a loan is restructured with the purpose of making it viable or to be repaid, and such restructuring involves the transfer of immovable property in Cyprus.
The main provisions are as follows:
‘Restructuring’ means the direct or indirect sale and transfer of immovable property as well as the transfer of rights under the contract for sale deposited with the Department of Lands and Surveys, where such transfer is made between one or more borrowers and/or debtors and/or guarantors on the credit facility/grant/debt and one or more
lenders, made until 31 December 2017 with the aim to reduce or repay
a credit facility/loan/debt granted to borrowers by one or more lenders.
“Lender” means a licensed credit institution.
“Borrower” means a person who contracted with a lender.
“Restructuring price” means the price at which the property is transferred under restructuring as determined in the agreement between the lender and the borrower.
- Any gains realized in the course of the restructuring are not subject to Capital Gains Tax
- Any gains realized in the course of the restructuring are not subject to (Corporate) Income Tax
- Transfer and registration of immovable property in the course of the restructuring is not subject to transfer fees
- No additions/deductions arise for balancing statement purposes for property transferred in the course of the restructuring
- Accounting profit arising in the course of the restructuring is disregarded for deemed distribution purposes
- Contracts/instruments concluded in the course of the restructuring or any future repurchase of mortgage collateral are exempt from Cypriot stamp duty
- Any encumbrance placed on the property acquired in the course of the restructuring is transferrable from the borrower to the lender along with the property
For taxation purposes the cost of property acquired in the course of restructuring is equal to the restructuring price and the disposal proceeds are reduced by any amount returned to the borrower in accordance with the restructuring agreement.
The above is expected to assist both the Financial Institutions and Borrowers to effect such immovable property transfers in Cyprus with a view to servicing the outstanding loans, with a lower cost.