Tax Alert – Cyprus tax legislation amendment for extending the application of the debt restructuring provisions to 31 December 2021

Tax Alert – Cyprus tax legislation amendment for extending the application of the debt restructuring provisions to 31 December 2021

On 3 December 2020 the Cyprus Parliament voted for the extension of relevant tax provisions of the Cyprus tax legislation with respect to the debt restructurings.

The debt restructuring provisions allow for certain tax relief incentives for transactions which involve the transfer of Cyprus immovable property by a borrower and/or debtor and/or guarantor to a qualified lender.

Below is a brief description of the main tax reliefs and incentives in relation to loan restructuring arrangements:

  • In case of loan restructuring, there is no payment of stamp duty. It should be noted that there is no payment of stamp duty up to the amount of the existing debt.
  • Any profit arising from the disposal of the property in the context of a loan restructuring is exempt from capital gains tax.
  • When there is a transfer of real estate to the lender, there is no payment of land transfer fees.
  • Accounting profits arising in the context of restructuring are not subject to the deemed distribution provisions.
  • Anу benefit, profit or gain arising in the context of restructuring is exempt from income tax.

 

The relevant tax relief incentives entered into force on 31 December 2015 for an initial period of two years to 31 December 2017, and have already been extended twice, with the second extension being to 31 December 2020.

The current third extension to 31 December 2021 relates to the below tax laws:

  • The Income Tax Law;
  • The Special Defence Contribution Law;
  • The Capital Gains Tax Law;
  • The Stamp Duty Law;
  • The Collection of Taxes Law;
  • The Department of Lands and Surveys (Fees and Charges) Law;
  • The Value Added Tax Law.

 

The extension was published in the Cyprus Government Gazette on 15 December 2020.