In a strategic move to support economic stability and assist businesses in financial restructuring, Cyprus has extended its debt restructuring tax relief provisions until December 31, 2025. This extension, published in the Cyprus Government Gazette on December 31, 2024, marks the seventh continuation of these beneficial measures since their initial introduction in 2015. The extension underscores Cyprus’ ongoing commitment to facilitating debt resolution for businesses and individuals facing financial distress.
Key Highlights of the Debt Restructuring Tax Relief Measures
Scope of Relief
The provisions provide tax exemptions on transactions related to the transfer of immovable property or shares in companies holding immovable property when such transactions occur as part of a debt restructuring arrangement.
The relief applies to borrowers, debtors, and guarantors transferring assets to qualified lenders, which typically include banks and licensed credit institutions.
Applicable Tax Exemptions
The extended provisions offer exemptions from several types of taxation that would normally apply to these transactions, including:
- Income Tax: Exempting gains derived from the restructuring process.
- Special Defence Contribution (SDC): Exempting applicable transfers.
- Capital Gains Tax (CGT): Avoiding tax on gains from the disposal of immovable property.
- Stamp Duty: Ensuring that related contracts are not subject to additional fiscal burdens.
- Value Added Tax (VAT): Ensuring that debt restructuring transactions remain exempt where applicable.
Objective and Economic Impact
The main goal of extending these provisions is to facilitate effective debt restructuring, allowing businesses and individuals to manage their financial obligations more efficiently without facing excessive tax liabilities. This is particularly important for companies and investors involved in real estate, financial services, and other capital-intensive sectors.
Since its introduction in 2015, the measure has helped stabilize Cyprus’ financial system by reducing non-performing loans (NPLs), improving liquidity in the banking sector, and encouraging economic growth. The continuation of this policy signals the government’s recognition of the ongoing need for financial support in restructuring debt, especially given global economic uncertainties and inflationary pressures.
How This Affects Investors and Businesses
The extension of the tax relief provisions provides significant advantages to businesses and investors:
- Easier debt restructuring: Companies facing financial difficulties can restructure obligations without triggering heavy tax burdens.
- Improved property market conditions: The exemption on property transfers reduces market disruptions and supports real estate investments.
- Banking sector stability: By facilitating smoother debt settlements, the measure contributes to financial system resilience.
Savva & Associates: Your Trusted Partner in Tax & Financial Advisory
At Savva & Associates, we specialize in helping businesses, property owners, and investors navigate Cyprus’ tax landscape while maximizing available incentives. Whether you need assistance in structuring a tax-efficient debt restructuring plan or ensuring compliance with the latest regulations, our team of experts is here to guide you every step of the way.
Contact us today to explore how these extended tax relief measures can benefit your business or personal financial planning.
Please get in touch with our team at:
| Charles Savva Managing Director BA, MBA, TEP, CA [email protected] +357 22516671 | Mina Pieri Senior Manager FCCA, MBA [email protected] +357 22510207 | Makis Pavlou Account Manager FCCA [email protected] +357 22510257 |
