Barabashev & partners

Cyprus is planning to take money from depositors with bank accounts.

Date: 16-03-2013
The lengthy negotiations between the Cyprus Government and the Eurogroup have reached a political agreement in the early hours of this morning on the key measures that need to be taken to ensure the stability of the Banking and Financial sector in Cyprus.

The Cyprus Government has agreed today to carry out a number of fiscal measures and structural reforms to support the country’s competitiveness and aim for a sustainable and balanced growth, correcting at the same time a number of macroeconomic imbalances. This agreement will be put before Parliament for approval before Tuesday, 19 March 2013.

The agreement provides for a one-off stability levy on bank deposits in Cyprus. The levy has been announced at 6.75% on bank deposits of up to ?100,000 and 9.9% on bank deposits in excess of ?100,000.

This measure is expected to raise ?5.8bln, which together with ?10bln financial support from the European Central Bank and the International Monetary Fund will cover the necessary funding requirements for Cyprus.

Based on information in the press the Cypriot banks are taking the necessary steps to implement theses measures before the opening of business on Tuesday, 19 March 2013, given that Monday, 18 March is a public holiday.

According to the announcements, the measures include an increase of the corporate tax rate from 10% to 12.5% and an increase in the Special Defence Contribution on interest from 15% to a percentage up to 25%.

The new measures still exempt dividends, capital gains on shares, other securities and immovable property as well as interest earned by non-residents from taxation.

We are constantly monitoring the situation and we will provide further updates as any new information becomes available.

In the meantime, please feel free to contact us for any assistance.
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