The Cypriot parliament is preparing to extend tax incentives for loan restructuring for another year.
A session is expected to be held in the near future where MPs will vote to extend the current arrangements until 31 December 2025.
In this way, the owners of the troubled loans will have the opportunity to reduce their financial burden and the Cypriot banks will be able to reduce the amount of overdue debt on their balance sheets. In the event of a positive decision, no special defence levy on accounting profits or notional interest, no property registration tax and no stamp duty will be levied on loan restructurings until the end of next year.
We would like to remind you that restructuring is a process of changing the terms and conditions of the existing loan agreement. At the same time, the agreement itself remains in force and all issues remain within the competence of the bank that issued the loan. It is not possible to switch to another bank under this programme. The main purpose of restructuring is to help the borrower, who is experiencing repayment difficulties, to improve his financial situation.
These measures are intended to relieve the borrower and reduce the risk of default. Incidentally, the terms of the loan are not significantly improved by restructuring - for the borrower it is rather a chance to take a temporary "breather", to avoid a critical financial situation and to maintain normal relations with the bank. For their part, lenders make such concessions in order to avoid being saddled with debts that are difficult or impossible to collect. This approach allows banks to recover funds without having to resort to litigation or seizure of property.