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Exemptions from interest rate ceiling for certain corporate financing arrangements

January 2012 - Finance. Legal Developments by Andreas Neocleous & Co.

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Following the enactment in April 2011 of Law 72(I) of 2011, which made it illegal to charge interest above a specified rate (currently 12.57%) on loans, the Penal Code, Cap 154, has been further amended to introduce an exemption for corporate financial arrangements, namely:

  • Loans where the lender and the borrower are legal persons which are deemed to be connected persons for the purposes of article 33 of the Income Tax Law.
  • Loans to legal persons where the capital out of which the loan is provided derives directly or indirectly from sources outside the Republic, provided that the amount of the loan exceeds €1,000,000 and the minimum drawdown amount is €500,000.
  • Loans to legal persons which is disbursed overseas provided that the amount of the loan exceeds €1,000,000 and the minimum drawdown amount is €500,000.

The recent amendment is a long awaited development which reflects Cyprus’s position as an international financial centre and allows companies flexibility in their financing arrangements. It appears to us that the exemptions are sufficiently wide to provide this flexibility.

For more information please visit www.neocleous.com

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