Bills rewarding bad borrowers may pass

Elias Hazou
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Bills rewarding bad borrowers may pass

Bills rewarding bad borrowers may passMPS OF THE ruling Disy party sounded upbeat on Monday that a series of bills granting tax relief to bank debtors would make it through the plenum.

The House finance committee was discussing five bills which aim to give incentives to people who wish to sell their house as part of restructuring their debt with a bank or to settle a non-performing loan (NPL).

Under the proposals, these persons would be exempt from paying income tax, capital gains tax, property transfer fees, stamp duty and the special defence contribution.

Crucially, the bills under discussion also cover cases where borrowers sell their house on the market, and not just via a debt-for-asset swap with a bank.

Disy leader and MP Averof Neophytou said the legislative proposals had gathered enough momentum in committee, so that it was decided to table them to a plenary session.

Concerns brushed aside

Neophytou brushed off concerns that the proposed legislation might incentivise bank debtors who are currently consistent with their payments, to become delinquent so that they can benefit from the tax relief offered.

“No serious lawmaker would author a bill opening a backdoor NPLs to skyrocket,” the Disy boss said.

He noted that the legislation contained safeguards, such as that it would apply only to debt which was classified as non-performing as at December 31, 2015.

“We wanted to cover borrowers who, due to the financial squeeze, were unable to cope with their loan payments…it is not our goal to provide strategic defaulters an additional tool,” he said.

“And we at Disy will be very harsh on these strategic defaulters,” he added.

The purpose of the legislation is to “help borrowers, poor people, small and medium-sized businesses who, because of the economic crisis, could not temporarily keep up with their instalments”.

For their part, main opposition Akel were sceptical about who would ultimately benefit.

MP Stefanos Stefanou said it was disconcerting that, despite repeated calls, both the finance ministry as well as the Central Bank have failed to provide detailed data on NPLs.

“Knowing the overall value of NPLs is not enough. We need to know what percentage do these strategic defaulters account for, and who these people are.”

The International Monetary Fund, the European Central Bank and the European Commission have warned Cyprus of the dangers of not reducing NPLs on banks’ balance sheets. They say that the slow pace of NPL reduction is chiefly due to a weak foreclosures system.

According to the latest available data, delinquent loans in the Cypriot banking system are at €22.1bn.

Applications from Golden visa providers

Stelios Orphanides
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Applications from Golden visa providers

Cyprus Golden visa providersTHE MINISTRY of finance said Friday that a committee for the supervision and control of the government’s citizenship-by-investment (Golden Visa) programme will start accepting applications from providers of relating services to be included on a special registry.

Interested parties will have to submit their applications using a special form on the website of the committee, which was set up by the cabinet in January, the ministry said.

Code of conduct

Applicants like property developers, law and accounting firms and other professionals, are required to sign and comply with the provisions of a code of conduct, which among others, obliges them to verify the legitimacy of an investor’s funds and refrain from advertising the scheme as a Cypriot passport sale, it added.

“The registry will be published on July 31, 2018 on the websites of the ministries of finance and the interior and Invest Cyprus (the former Cyprus Investment Promotion Agency),” the ministry said. “It is stressed that the July 31, registry will include the applications submitted by July 18, 2018, provided they are approved.”

The finance ministry added that the committee will update the registry in regular intervals and that golden visa applicants will continue to submit their documents and applications based on the existing procedure by July 30.

“From July 31, 2018 onwards, applications for naturalisation may be submitted only by registered service providers, who can participate in a special training seminar on Thursday, June 21,” the ministry said. Participants will receive a certificate of attendance, which is one of the registration requirements for service providers.

Cyprus’ citizenship-by-investment scheme, renamed Cyprus Investment Programme, allows investors to acquire the Cypriot citizenship in a fast-track procedure with a €2m investment. Since the introduction of the scheme in its current form in 2014 and in a previous form in 2008, Cyprus has granted citizenships to 1,685 investors and 1,651 family members.

In May, the government decided to introduce a cap of 700 citizenships per year, above the 503 passports offered in 2017, which was the highest ever in a year.

Enhanced due diligence procedures

It also decided to subject applicants to enhanced due diligence procedures in an apparent response to criticism from non-governmental organisation Transparency International, which said Cyprus’ programme undermined the fight against money laundering and corruption.

Three months ago, the European Commission said it would prepare a report about the visa programmes offered by member states.

Cypriot authorities were more concerned about service providers, including developers, real estate agents, and law firms, actively advertising the scheme on their websites or in foreign media.

MPs table bill to tax Airbnb-style rentals

Elias Hazou
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4
MPs table bill to tax Airbnb-style rentals

Cyprus MPs bill tax Airbnb rentalsTWO MPs have tabled a bill that aims to regulate and tax short-term property rentals like Airbnb.

According to Disy deputy Averof Neophytou, who co-authored the legislative proposal, approximately one-third of tourists stay in unregistered accommodation.

The bill aims to control this ‘illegality’, he added.

The proposal, which Neophytou said should go before the plenum before parliament breaks up for the summer holidays, amends the law on hotel and tourism accommodation by adding clauses setting out technical, operational and health specifications for self-catering accommodations such as those leased via Airbnb.

It will also create a registry of self-catering accommodation. The registry will be maintained by the Cyprus Tourism Organisation.

Anyone renting out their property short-term would be legally required to register.

Neophytou claimed the change would benefit thousands of households, since people would be able to rent their country villas or flats out short-term. In some cases, he predicted, the earnings might exceed a household’s normal income.

The income would then be taxed.

Although Neophytou said this sort of activity is currently illegal, it was not entirely clear whether this is true.

It’s understood that other than single-day leasing, which is unlawful, short-term leasing is not illegal.

Neophytou demurred when asked about the hoteliers’ position on the matter, saying only that regardless of their views the proposed measure “will help normal folk and households.”

The Disy MP suggested that a ‘transition period’ might be implemented once the law is passed.

Edek MP Elias Myrianthous, the bill’s other author, said that at a later stage parliament would be addressing the issue of the short-term rental of flats within apartment blocks.

Angelos Votsis, chair of the House commerce committee, explained that the bill refers to self-catering furnished tourism accommodation, and will mandate that these be leased in whole and not in part.

During an earlier discussion in parliament, it was said that at present there are some 20,000 country homes and holiday cottages that are unregulated but leased online.

Limassol rent price protest

Nigel Howarth
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Limassol rent price protest

More than 1,000 Limassolians and others are expected to gather in front of the Limassol District Administration Offices in Anexartisias Street on June 23rd at 18:00 to protest against the exorbitant rent prices in Limassol.

Although residential property rents have been rising across Cyprus, Limassol has been particularly affected with rents sky rocketing in recent times.

Organised by the Limassol initiative group the protestors will be calling for an end to “the socially and ecologically disastrous policies that render our town liveable only for the financially privileged groups of citizens.”

They are saying NO to:

  • the exorbitant rent prices in Limassol
  • the displacement of middle and lower social strata from the city’s core
  • the ongoing elimination of public space
  • the criminal exclusion of citizens from the decision making that affects their city
  • the construction of speculative bubble high-rise building and the impending environmental disaster
  • the ongoing deterioration of the city’s character
  • government policies that put the interests and profits of developers and law firms above the needs of ordinary citizens

And are demanding:

  • the immediate and meaningful intervention of the state for tackling the lack of affordable housing in Limassol
  • the immediate construction of quality and affordable housing infrastructure for middle and lower income strata
  • the immediate inclusion of citizens in the decision-making process that directly affect their living environment
  • more public and green spaces

The initiative group considers that “these problems are interconnected. High-rise buildings, astronomical rents and the commercialization of public space are phenomena directly related to the economic crisis.

“The ‘development’ of the towers is not taking place on behalf of the citizens but against them, to extract more profits for the developer-lawyer-public official-complex. This kind of ‘development’ excludes the lower and financially vulnerable social strata from their right to the city.”

Further details on Facebook (Greek & English).

Reward bad borrowers; punish the good

Nigel Howarth
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Reward bad borrowers; punish the good

Reward bad borrowers in CyprusSOMETIMES the logic of politicians is impossible to fathom, such as the legislative changes to be discussed and voted by the Cyprus parliament by July that will reward bad borrowers who are unable/unwilling to pay their debts by offering them tax relief.

Four bills are up for discussion to incentivise borrowers who wish to sell their house as part of restructuring their debt with a bank or to settle a non-performing loan (NPL), reports the Cyprus Mail.

Under the proposals these ‘bad borrowers’ be exempted from paying income tax, capital gains tax, stamp duty and the special defence contribution.

A fifth bill, if passed, will exempt those who wish to sell their property to restructure their debt or settle their non-performing loan from paying Property Transfer Fees.

The proposals will also cover cases where borrowers sell their house on the free market, according to the co-author of the bills Disy MP Averof Neophytou.

Neophytou’s reasoning is that ‘bad borrowers’ will be able to sell their property on the open market at a higher price, as a bank will use the ‘forced sale value’ of a property when it carries out in a debt-for-asset swap; a property’s forced sale value is significantly lower than its market value.

It seems that the bills have the support of all political parties, the Finance Ministry and the Association of Cyprus Banks.

I’m certain that ‘bad borrowers’ will applaud the news that they will be offered tax breaks and other incentives.

And I’m equally certain that ‘good borrowers’, who continue to maintain their loan repayments in the face of financial difficulties will not be amused.

However, this will send a signal to many of the ‘good borrowers’ to default on their loans to take advantage of the incentives being offered to ‘bad borrowers’.

Speeding up issue of Title Deeds

Stelios Orphanides
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Speeding up issue of Title Deeds

Pantelis Leptos said that that while investor interest in real estate on the island is unprecedented thanks to the state’s efforts, the government is ready to discuss ways to speed up the issue of Title Deeds.

Leptos who was commenting after a meeting with President Nicos Anastasiades in Nicosia on Monday, said that while the real estate market was out of the woods and the situation was currently better compared with three years ago, there is still way to go to improve the quality of the services and the product offered by Cypriot developers.

The chairman of the business group told reporters following the meeting, also attended by Interior Minister Constantinos Petrides, that he discussed “the matter of the timely issue of various permits to avoid delays and the overhaul of the Title Deed issue system,” according to a message emailed by the Press and Information Office.

Delays in the issue of Title Deeds to buyers, usually resulting from town planning violations by developers or outstanding in their financial obligations, has tarnished the reputation of the island’s builders abroad, as it relies on property sales to foreigners to support economic growth and prevent property prices – which stabilised last year for the first time after the crisis – from further decline, which would in turn negatively affect the balance sheet of fragile Cypriot lenders.

Government policies, such as the Golden Visa scheme which allows investors to acquire either a Cypriot passport or a permanent residency and tax breaks and town planning relaxations, have helped increase both demand and supply on the real estate market as well as construction activity.

A study carried out by the CLBDA, showed that outsourcing preparatory work required for the Title Deed issue, such as permits and certificates, to the private sector, “mainly civil engineers,” could help both property buyers and sellers.

The government’s reaction to the proposals of the CLBDA, whose deputy chairman is Yiannis Misirlis, son-in-law of President Anastasiades, was very positive, Leptos said that added that there will be further meetings with the interior minister and officials of relevant government departments.

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