Cyprus and Troika finally to agree on bailout

LARNACA, Cyprus - April 5, 2013 - PRLog -- A) Restructuring of Laiki Bank – this means that Laiki Bank will be divided into two; a ‘Good Laiki’ and a ‘Bad Laiki’;

a) The ‘Good Laiki’ will be merged with Bank of Cyprus. Accounts in Laiki that have up to €100,000 will be transferred to the ‘Good Laiki’. For the accounts that have more than €100,000; the amount up to €100,000 will be transferred to the ‘Good Laiki’ and around 50% of the funds will stay in the bad one so that the debts of the bank can be paid.  That means creating a "good" bank holding safe loans and deposits covered by the EU's 100,000-euro guarantee threshold and a "bad" bank holding bed debts and, crucially, those deposits placed in the two main lenders worth more than €100,000. Money channeled into this "bad" bank could be tied up for a period of maximum three years with the possibility of 1+1 more year extension as the authorities absorb losses from soured loans, with the level of this involuntary "haircut" tipped at least in the 25% range. Though one must keep in mind that there may be changes in the aforementioned since there is a certain level of uncertainty and things change day by day.

The deposits that will be transferred to the Good Laiki are estimated to be at around €3 billion. Together with the deposits, good and healthy loans will also be transferred to the Good Laiki;

b) Bank of Cyprus will have full contribution of shareholders, bond holders and of creditors; this means that the shareholders, the bondholders and the creditors that will be transferred from Laiki Bank to the ‘Good Laiki’ will be under the control of Bank of Cyprus; and

c) Bank of Cyprus will be recapitalised up to 9% capital ratio and only the uninsured deposits or balances over €100,000 will take part in recapitalisation as well as the contributions of shareholders and bond holders.

Most of the banks are in continuous discussions with the authorities doing the utmost to safeguard the clients/investors interests. Their aim is to return ‘business as usual’ as soon as possible.

B) Besides the above, Eurogroup wants Cyprus to implement the below measures:

a)      Increase of corporate tax from 10% to 12.5%; and

b)      Increase of the withholding tax on capital income.

Even if the above law passes and the corporate tax in Cyprus increases from 10% to 12.5% Cyprus will still have one of the lowest corporate tax rates in the EU. The new corporate tax is not expected to significantly affect the use of Cyprus in tax structures, since Cyprus will remain an attractive jurisdiction for the reasons of:

·        Extensive double tax treaties (DTT) Cyprus has secured with other countries;

·        Benefit from the application of the provisions of the EU Parent-Subsidiary Directive, the EU   Interest and Royalties Directive, and the EU Merger Directive;

·        Zero withholding tax  on dividends distribution to the non resident shareholders of the Cyprus Holding company; and

·        The fact that no capital gains tax is levied on the disposal of shares as well as many more other    benefits.

For further information please contact our tax team at info@eurofast.eu

Cyprus/ 28 March 2013

Temporary restrictive measures on transactions of Cyprus Banks

After the latest developments in Cyprus, all banks re-opened today (28 March 2013) from 12:00pm till 18:00pm.

The Central Bank of Cyprus has applied the below measures and restrictions but these are temporary in order to regulate the flow of capital in Cyprus and safeguard the stability of the economic system.  These measures are expected to be reviewed and changed in the coming days. The restrictions are as below:

1.      Each individual is allowed to withdraw on a daily basis in cash the amount of €300.

2.      Companies can carry out transactions up to €5.000 on a daily basis per account. In case companies want to pay their payroll, they can make these along with supporting documentation such as pay slip.  Cash payments are not allowed for salaries.

3.      Cheques are not allowed to be cashed immediately; these can only be deposited in an account and then restrictions mentioned above applicable.

4.      Any non-cash payment or money transfer outside the Republic of Cyprus or to any account maintained from another credit institution is not allowed, other than:

a. Any payments from €5.001 to €200.000 will have to be approved by the Committee (special committee set up by the Ministry of Finance). The Committee will take its decision in 24 hours according to the availability of cash in the Bank.

b.          Any payment above € 200.001, subject to prior approval by the Committee, at the request of the credit institution. The Committee will take its decision in 24 hours according the availability of cash in the Bank.

c.          Maintenance costs up to € 5.000 per quarter including tuition fees of a person studying abroad and first degree relative is a person who is ordinarily resident in the Republic. Payments for maintenance expenses are allowed only when supporting documents are shown to the bank and these should be presented to the bank by a first degree relative. A birth certificate or a confirmation would be accepted.

d.          Any payments or money transfers via debit, credit, or prepaid card, up to € 5.000 per month per person per Bank.      

5.      Termination of deposits before the expiry date is not allowed unless the funds will be used for paying off loans within the same bank.

6.      The restrictive measures will apply to all accounts, payments and transfers regardless of the currency domination.

7.      For travelling abroad more than €1000 per person/per journey is not allowed to be taken outside the Republic.

The above restrictions are not applicable to the below:

Any new funds transferred from aboard to Cyprus;
Change of cheque that is issued by a foreign bank and/or withdrawal of cash through debit, credit or through prepaid card issued by foreign banks;
Withdrawal of cash from foreign account;
Withdrawal of cash from Credit Banks through the Central Bank;
The Cyprus Government Authorities;
The Central Bank of Cyprus;
Payments that have been approved by the Committee;
Diplomatic missions

Please note that different procedures are applied in each bank and we are happy to offer you solutions. For further information please contact our banking team at banking@eurofast.eu.  

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