Category: Retirement

A new bill imposing Value Added Tax (VAT) on the supply of building land has been approved by the Cyprus Parliament and has come into force on the 2nd of January 2018. The bill has amended the Value Added Tax Law (95(I)/2000) (VAT Law) so that a VAT rate will be levied on transactions of undeveloped building land which are carried out after the 2nd of January 2018 for business purposes.

Until recently, the supply of land was excluded from VAT.

However, Cyprus had to comply with the EU Directive 2006/112/EC with regards to the common system of VAT. To that end, the amending VAT Law 157(I)/2017 was published in the Governmental Gazette on the 13th of November 2017 and has come into force early this year.

The amendment introduces VAT at the standard rate of 19% for the supply of undeveloped building land. The VAT is imposed in cases where the supply is intended for the erection of one or more constructions and the supply falls within the course of a person’s economic or business activities.

It is noted that the supply of land is not subject to VAT in cases where the supply is an occasional transaction. On the other hand, VAT could be levied even if the supplier is not in the business of selling land.

The amendment provides that VAT is imposed on the supply of undeveloped and buildable land including plots of land under creation or under construction, completed plots or plots with a certificate of final approval or title deed. A piece of land can be subject to VAT even if it is registered with the Lands and Surveys Department with other names such as building, residence, courtyard. Pieces of land located outside the development area for which a planning permit or/and a building permit has been obtained for a large or other type of development can be subject to VAT.

The supply of land which is located in livestock zone or in areas which are not intended for development e.g. archeological or agricultural areas or zones of environmental protection, is excluded from VAT.
Besides the type of the land, the nature of the supply as well as the number and frequency of the transactions are crucial factors to be taken into consideration to determine if the transaction will be regarded as a business activity. Nonetheless, each case is examined by the Tax Department on its own conditions. In particular, the Tax Department will examine if an economic activity is carried out systematically or as part of a profession, if it is based on recognized business practice or targets consumers for a consideration.
As per the provisions of the Section 3 of the VAT Law, the business activity is exercised independently, and in any place, irrespective of the intended purpose or result of the activity. Economic activities within the meaning of this Section are all the activities of a producer, merchant or service provider including extraction, farming or freelancing activities, as well as the exploitation of tangible or intangible assets for the purpose of generating lasting income.

If the plot of land belongs to a company, the land’s disposal will be subject to VAT, irrespective of the type of the economic activity that the company carries out.
The amendment provides that if the transfer of the land was concluded before the 2nd of January 2018 or if the Sales Agreement was lodged with the Land Registry or with the Tax Commissioner before the 2nd of January 2018, the transaction will not be subject to VAT.

The content of this article intends to provide a general guide to the subject matter. Specialist advice and tax planning should be sought on each particular case. For any further information, please contact us.

The Cypriot banking system is currently being confronted with the issue of providing foreign loans and in particular Swiss francs to both locals and foreigners to cover their housing requirements. Of principle concern in Cypriot and European Courts are the banking practices used in attracting clients to these financial institutions. It seems that misinformation through the use of various means of bank notifications and practices point towards the use of the distortion and the concealment of essential information
to borrowers. The Cypriot banking system (that is sanctioned by European banking) in the provision of Swiss Francs did not in most cases provide a complete and proper briefing of the risks involved in these types of loan contracts that also incorporated exchange and interest rate fluctuations.

The elements of a loan and in particular of foreign currency loans are subject to 2 principal factors: a) the currency exchange rate that will determine the content of the contract and the contractual obligations of the borrower against the bank and b) the variable interest rates (which include the type of Libor) and/or other interest rates.

The first factor (a) is significant in the agreement of the repayment of the loan since currency exchange rates affect loans when loans are provided in a currency that are dissimilar to the borrowers’ currency of income. The loan varies and fluctuates (normally increases) when the borrower is unaware of the required payment amount of the monthly installment. However, many borrowers that had paid regularly and on time observed that their balances owed did not decrease but increased when compared to the original loan sum provided by their banks.

The second component relates to the interest rate profits of banks. Many of the banks pre-drafted contracts are determined on the type of interest and the interest rate amount. Therefore, borrowers should be particularly vigilant on the unfair terms contained in these types of agreements that impose conditions unfavourable for borrowers and are not clarified and/or explained by the banks. Unfair terms include interest rate fluctuations, interest on late payments and compound interests added by the banks. Interest rates dramatically affect the borrowers’ liability owed to the bank and increases the loan amount owed to them.
Essentially borrowers were required to pay back twice or three times more on their original loans. It is therefore reasonable to question as to whether borrowers would have agreed to sign this type of agreement knowing the dangers and risks involved.

Commercial practices would be regarded as unfair/unjust if there is a distortion of facts and the suppression and/or disregard of crucial information for the sole purpose of convincing the other party to partake in an agreement without being aware of the real facts. Therefore, it could be considered as false representation, an error and/or fraud according to section 149 of the contract law. False information could be based on ignorance/lack of knowledge or purposely intended to effect the finalisation of an agreement.

The banks in the period between 2006 to 2012 promoted numerous Swiss Franc loans that were granted either to foreigners buying homes for investment purposes or to locals to fulfil their housing requirements.
Financial institutions upheld that borrowers would receive the rapid granting of their loans and low interest rates on the main ‘Libor’ type in contrast to the ‘Euribor’ imposed on other mortgage loans. This practice was encouraged by banks to attract more borrowers at a time when the Cypriot banks possessed enough liquidity to sell their products.

The bank during this period did not conform to the dictates of good faith and did not demonstrate due diligence towards their clients. Furthermore, there was an avoidance of informing clients on the exchange rate risks resulting from foreign currency credit that differed from their incomes and on the fluctuations of interest rates.

In recent years and in particular after the release of the Swiss Franc from the Central Bank of Switzerland the additional interest burden on loans have increased considerably for borrowers. Banking institutions were obligated to inform borrowers of these changes and its consequences since borrowers did not possess the specialised knowledge necessary to analyse the implications and negative turn of events involved in the release of the Swiss Franc from the Central Bank of Switzerland In addition, the loan agreements were prepared in a manner that did not safeguard the borrowers and contained unfair clauses, conditions and hidden terms in contravention of the provisions of the European Directive 93/13/EOK.

In the last 2 years in Cyprus, in and out of Court cases have progressed slowly but steadily with positive steps in favour of the borrowers based on a European orientation and in accordance with the amendments and establishment of new European directives and regulations. The start of vindicating the Swiss Franc borrowers was launched by the House of the Economic Council which prioritised judgement/opinion No. 56/23-11-2015 from the Director of the Office for Competition and Consumer Protection (that examined unjust contractual clauses on contracts on submission of a complaint). The first interim decision released was given by the District Court of Nicosia.
The Government and Central Bank should provide a
nother approach in appeasing the concerns of borrowers that includes examining bank practices.
The content of this article intends to provide a general guide to the subject matter. Specialist advice should be sought on each particular case.

For any further information, please contact

Michael Kyprianou & Co. LLC. proudly announces that Tonia Antoniou, Partner of the firm, has been included for the second consecutive year in the list of leading lawyers for Cyprus in the area of Banking and M&A by the IFLR1000 Guide.

On the 16th October 2017, IFLR1000 released its listing of leading individual financial and corporate lawyers 2018.

Tonia specializes in banking and finance law having represented international corporations and financial institutions since 2002. Often instructed by Magic Circle firms and acting for international banks in relation to finance transactions and security agreements, she is frequently involved in ship and aviation financing, corporate and company law including reorganizations and M&A and the Regulated Markets Law. She heads the Banking & Finance Department and the Corporate Department of the Limassol Office.
Click here to see Tonia’s distinction:
https://www.iflr1000.com/Lawyer/Tonia-Antoniou/Profile/28305#profile

In recent years, after the occurrence of the flourishing sale of real estate and the hidden obstacles to the issuance of clean property titles, it has become necessary and a principal factor for prospective and interested buyers of real estate, to carry out any appropriate search and control through legal and technical procedures on the property concerned which they intend to purchase, with regard to verifying the legality of the property.

To buy a property for any purpose and use is probably one of the most important financial transactions one makes. For this reason, according to the real estate offer of the immovable property for sale, the criteria for a good investment is primarily the purchase of real estate that is free of any legal or actual impediment, defect or encumbrance, which will make it possible for the issue of the separate title deed in the name of the new buyer.

Several cases have been brought before the Cypriot Courts with the main objective of the trial being to lift the legal and real barriers that make it impossible to transfer the property that has been purchased and that cause significant financial loss and costs to buyers of immovable property. Under these circumstances, the previous legislation that was in force and the observed practice where it was not mandatory to apply the so-called preliminary control of a prospective buyer in verifying the legality of the property in question, which presupposed the transfer of the purchased property immediately into the new owner’s name.

Prospective and interested buyers should contact competent persons for the purpose of carrying out legal checks, i.e. the existence or non-existence of any real burden or impediment, as well as specialised professionals in order to ascertain whether real obstacles exist or not.

The point made at this stage is that the distinction between legal impediments and real ones needs to be clarified, and this briefly touches a topic that is open to extensive analysis.

Legal impediments are created by the fact that there are real burdens and prohibitions on the immovable property rights under the Transfer and Mortgage Law where it is semantically attributable to the existence of a right by another on the registered owner of one or more direct claims through a charge or obligation on the property. The encumbrances as recorded in the aforementioned law are described in the First Amendment to Law 9/65, which mentions the most common, such as Mortgages and the registration of a court decision (MEMO). In particular, encumbrances and/or prohibitions relate to a registered right on and against immovable property for collateral purposes.

A typical example is often found in the registration of a mortgage on a piece of land that has been built up in a group of vertical or horizontal properties by the registered owner of the property prior to the separation and issue of separate title deeds on each of the real estate available for sale, and are taken for that purpose and not repaid to the funding Banking Institution which, in order to secure the facility provided, enters the entire piece of land in a mortgage on the individual sales of the real estate.
Legal barriers, by disclosing their existence to prospective purchasers, and by appropriate legal advice, can be addressed and/or preventive measures taken to avoid falling into a negative property market.

On the other hand, the legal obstacles to encumbrances are subject to real barriers, which vary and relate to any appropriate certificate or license document issued by the competent authorities to support the proper and legal construction of the building in question under the registered building plans and legal building standards issued by the competent public authorities.

Buyers are often asked to deal with the failure of sellers and construction companies to comply with planning and building permits, and are either called to justice for compliance and completion of authorisations approved by the authorities of the other contracting parties or are forced into financial disadvantage by the seller, and have to take care of themselves and the cost of completing the project, in order for the necessary certificates and permits to be issued, as well as comply fully with the technical legality of the building in question.

Purchasers in this case, through a thorough investigation of the certificates and permits for the construction of the property in question with the building (house, block of flats, commercial building), must contact legal and technical advisers to verify the issuance and compliance of the necessary permits and certificates. However, it should be noted that the audit is not only a matter of verifying the existence of these permits but also of their content as they may have been issued under terms and notes of omissions and/or deficiencies that impede the process of issuing clean title deeds.

Essential documents for the issuance of separate title deeds to new buyers include, but are not limited to, the final approval certificate or otherwise the final certificate, the building permit, and the town planning permit. This is where the authorities issuing certificates for the building’s security, electrical control as well as archaeological control are involved. The public authorities in the issuing of separate titles carry out street, topographic, border control, site surveying and all research and verification of compliance with the technical specifications of a construction project. Such inquiries need to be verified prior to the purchase of a property following legal and technical supervision and investigations to ensure the purchase of a legal and technical property.

The modern real estate market has embraced this issue. Purchases are now being concluded on new bases and data as buyers have an extensive picture of the purchased property at the preparation stage of the purchase agreement, which generally protects both parties. Purchasers should be mobilized by any appropriate measure to secure the market they intend to enter and defend their property rights before taking an important decision to invest in a property finance line and/or return. Legal advice provides for legal control, the assignment of technical control by an expert, the preparation of negotiations with the seller in such a way so as to safeguard the interests of the buyer and the overall coordination of any appropriate and necessary action for the purchase of a good property that will prevent the buyer from experiencing unnecessary conflicts and problems.

The content of this article intends to provide a general guide to the subject matter. Specialist advice should be sought on each particular case.

For any further information, please contact.

The economic downturn in recent years has resulted in the increase of natural persons declaring their businesses insolvent. Legislation that governs insolvency is based on Chapter 5 of the Insolvency Law according to the recent amendments of the law.

The purpose of bankruptcy is to proclaim that an individual is unable to repay their outstanding debts and through the bankruptcy process any assets will be allocated as
as compensation to any creditors that are owed money. For a natural person to declare their voluntary admission of bankruptcy an application on certain conditions that satisfies the law has to be made to the relevant jurisdiction of the Court, since being unable to pay your liabilities is not the only evidence that is inspected by the Court.

However, another method of declaring a natural person insolvent and perhaps the most common is an application by an unhappy creditor to the Court to safeguard any outstanding liabilities.
The Court for the purposes of regulating and disposing of any assets will issue what is known as a receipt of decree. The decree protects the assets of the debtor and an official receiver will be appointed to audit the financial position of that debtor.

The most asked question is to the process involved in being re-instated to a status of credit worthiness.
According to existing insolvency legislation an individual is permitted at any time after the declaration of bankruptcy to make the relevant application request to the Court. The Court will initially inspect the Receivers report and examine the nature of the debts that includes the conduct of the involved individual. The Court may at its discretion then issue or refuse an absolute decree of rehabilitation, suspend the validity of the Ordinance for a given time period, or issue a decree of rehabilitation under conditions that refer to any earnings or income that may later be to the benefit of the insolvent individual.

The debtor may not influence his insolvency position that could affect any of the assets involved and could result in the Court denying their restoration and suspending the validity of the decree.
In important amendments the Bankruptcy Law of 2015 (n. 61 (I)/2015) introduced the automatic restoration of insolvent persons. In accordance with the newest data there has been a noticeable reduction of persons being added to the insolvency register due to this new legislative framework.

Before the amendment, the bankrupt individual was automatically restored within a time period of 4 years. However with the amendment, restoration is possible within 3 years from the date of the bankruptcy ordinance. Nevertheless, part of the estate may remain under the management of the official receiver or administrator for the benefit of the creditors or guarantors that become non-secured creditors. The insolvent individual has to fully co-operate with the official receiver or administrator until there has been a full and final settlement of all liabilities.

The amended law secures creditors since it does not release the debtor from any liabilities until there has been a settlement of all liabilities that includes preferential debts, public debts, judicial fees etc.
The legislation was amended in Cyprus owing to the recession and the global crisis. The declaration of bankruptcy had become a lever to avoid debts and had consequently caused huge economic losses to creditors. Present legislation protects and safeguards financial losses incurred from the bankruptcy act of a natural person.

The content of this article intends to provide a general guide to the subject matter. Specialist advice should be sought on each particular case.

For any further information, please contact Mr Savvas Savvides at savvides@kyprianou.com.cy or telephone: +35726930800.

Meili I Pfortmüller
LexLegal can now act as a portal through which you/ your firm can be connected to the Swiss Market as we happily welcome our new member – Meili I Pfortmüller.

Meili I Pfortmüller is a firm of lawyers specializing in media, communication, entertainment and the arts.
Firm’s offices are situated in central Zurich, Switzerland’s premier location in terms of media and the economy.

LexLegal Representatives had a pleasure of meeting Meili I Pfortmüller members at their offices in June 2015. We are confident that the firm offers its client’s bespoke legal services and advice.

Swiss Franc loan contracts involved thousands of borrowers in default both in Cyprus and other Balkan and European countries. This particular banking product that had been promoted especially in the early 2000’s resulted in a severe socio-economic problem due to its adverse effects suffered by borrowers due to the depreciation of the exchange rates. The indignation of borrowers that observed a substantial increase in their balances on their loans and payments forced them to resort to legal measures to defend
their legal rights and entitlements.

The start of the judicial processes in various other European Courts and their decisions in favour of the borrowers have played a prominent role in the protection of creditors’ legal rights and the treatment of lending contracts that demonstrated the controversial and damaging clauses contained within the contracts against their clients. Consequently, the National European Court tended to adopt decisions that were in favour of the borrowers.

Recently, in Cyprus the first partial vindication of a borrower was heard before the District Court of Nicosia that contested the bank’s overcharges and the financial loss caused by the depreciation of the exchange rate between the Swiss Franc and the Euro. The loan was granted by the bank for the purposes of funding emergency housing.

The Plaintiffs (borrowers), as with the majority of bona fide borrowers, paid their loan instalments meticulously and regularly, however their loan never reduced over time and in fact continued to increase.
Swiss Franc borrowers were forced to convert their funds to pay their loan instalments on the day that the payments were due and according to the exchange rate on the date of the instalment payment. The devaluation and considerable downturn of the Swiss Franc negatively affected the loans and compounded the interest on the loans.

The Plaintiffs (borrowers)in this particular case requested the issuance of a protective interim order under the provisions of Article 32 of law 14/60 for: a) the suspension of the monthly instalments on the agreement, and b) the suspension of the defendants’ life insurances with 2 insurance companies in favour of the borrowers and not the bank.

The Cypriot Court on correctly interpreting the European Directive 93/13/EEC on the unfair terms in loan contracts applied the European Precedent of the European decision C-26/13 Kasler and Rabai v OPT Jelzalogbank Zrt dated 30/04/2014 regarding the borrowing of Swiss Francs and questioned the clauses that weakened the other parties negotiation chances and in particular the bank’s position of “take it or leave it” that was in violation of the borrowers’ principles of autonomy and their contractual freedoms.

It is on this basis that the Cypriot Court, directed the decision of the European Court of Justice in the case of Kasler for the understandable wording of terms so that they are meaningful and clear to a borrower.
It is widely viewed that the judge’s decision will primarily focus on ‘whether the manner and kind of lending represents a common loan agreement, for which the borrower knows from the beginning that he will be required to pay back a specific amount including the relevant interest on the loan’.

The Court rightly determined on the case that the borrower was not in a contractual position to have knowledge of the entire sum of the loan and the obligations/relationship between the lender and the borrower. In these types of loan contracts the content is normally unknown and/or undefined and/or unclear in the repayment of the loans that are reliant on exchange rate fluctuations (between the currency of the loan contract and the currency of the borrower’s income) including the variable interest rates imposed on the loan.

Although, the Cyprus Government has to date not taken a stance on this matter, the Cypriot Justice System has followed both European Legislation and Case Law in protecting the borrowers on contracts containing unfair and concealed terms by the banks for their sole purpose of gaining a profit.

The first Cypriot judgment (albeit interim) regarding Swiss franc loans in conjunction with the European Legislation and Case Law are formidable safeguards that are available to borrowers in difficulty to restore their financial losses they have suffered through the Courts.

The content of this article intends to provide a general guide to the subject matter. Specialist advice should be sought on each particular case. For any further information, please contact Mr Savvas Savvides at savvides@kyprianou.com.cy

We are pleased to say that the Italian Law Firm, Studio LegalePadovan, is now a member of LexLegal International Lawyers Network.
Studio LegalePadovan is based in Milan and is serving business clients worldwide on matters of Italian, European and International law.
The practice is recommended by Legal 500and is distinguished by its expertise in construction law, export control and banking matters, as well as general business law and litigation.
We believe that this is a beginning of a strong and successful relationship.

We are pleased to announce that Stankovic Law Office, Serbia, has now joined LexLegal International Lawyers Network!

Stankovic Law Office is specialized in providing numerous attorney services. Fifteen years of experience in Advocacy qualify Stankovic Law Office for providing legal services of representation of domestic and foreign subjects in front of courts and other institutions of Republic of Serbia as well as in front of international courts, arbitration and other institutions. Especially important segment of business of Stankovic Law Office is realized in the field of financial law in part of cooperation with banks and specialized financial legal entity’s.

Stankovic Law Office provides legal and business consulting services to domestic and foreign clients and provides legal support to its regular work and business in Serbia and abroad.
Stankovic Law Office is on the list of recommended law firms by the Embassy of the United States and the British Consulate, Belgrade. Further, the founder of Stankovic Law Office is a member of AmCham in Serbia.