Cyprus has extended the tax benefits applicable to the restructuring of non-performing loans until December 31, 2022.
The current period expires at the end of 2021.
The members of the Parliament voted in favor of the proposal submitted by Harris Georgiades, Onufrios Koulla and Savia Orphanidou on behalf of the Democratic Union political party, as well as Christiana Erotokritou and Chrysis Pantelidis on behalf of the EDEK political party.
Cypriot officials expressed hope that this step will have a positive impact on the process of restructuring loans and will help reduce the amount of overdue debt on the balance sheets of banks in Cyprus.
Until the end of 2022, in the context of loan restructuring, a special fee for defense needs will not be charged for accounting profits or conditional interest. The property rights registration tax and stamp duty have also been abolished.
For income tax purposes, any profit or loss occurring as part of the restructuring is not included in the tax base. Capital gains tax on transactions in the context of restructuring is also not charged. Any tax encumbrances available for real estate being alienated in exchange for repayment of the loan are transferred from the debtor to the credit institution.
It is worth noting that in practice banks often restructure non-performing loans by issuing new ones. The Tax Service is considering a lot of cases concerning loans that as of December 31, 2015 were recognized as non-serviceable, then were repaid with other loans, while neither the bank nor the person being credited took advantage of the opportunity to receive tax benefits for loan restructuring.