Cyprus has taken a very important step in normalising the banking sector with the recapitalisation of Bank of Cyprus (“BoC”), and the exit of BoC from the resolution process. A common announcement by the Central Bank of Cyprus and the Ministry of Finance marked the end of the resolution process for Bank of Cyprus. A percentage of 47.5% of uninsured deposits was converted into share capital achieving a Tier 1 Equity ratio of 12%, well above the minimum of 9% and one of the highest in Europe.

The Central Bank will take no further actions under the relevant Resolution Law and BoC will be managed by the transitional Board of Directors up until the Extraordinary General Meeting in which the new shareholders (former depositors) will elect the new Board of Directors.

There has also been a first review of the Cyprus economic program by the European Commission (EC), the European Central Bank (ECB) and the InternationaI Monetary Fund (IMF). In a statement issued on 31 July 2013, the international lenders noted the positive progress made by the Cypriot authorities: “Our overall assessment is that Cyprus’s program is on track. All the fiscal targets have been met as a result of significant fiscal consolidation measures underway and prudent budget execution. The authorities have taken decisive steps to stabilize the financial sector and have already been gradually relaxing deposit restrictions and capital controls.”

Cyprus has modernised its treaty network and strengthened the investment relationship between the island and Ukraine. On the 23rd of July 2013, the Ukrainian president signed the law on ratification of the Treaty for the Avoidance of Double Taxation between its nation and the Republic of Cyprus. This new treaty for the avoidance of double taxation and the prevention of fiscal evasion signed will replace the existing Tax Treaty signed between Cyprus and the USSR in 1982. It is expected that formal exchange of notices of ratification will take place before the end of this year, and so the double taxation treaty will enter into force on the 1st of January 2014.

Constructive use of the Cyprus Treaties’ Network has rendered considerable advantages to businesses and individuals who have chosen to establish legal entities in Cyprus. Tax treaties, in Cyprus and most countries, legally supersede local tax legislation and for this reason they are a useful tax-planning tool to protect businesses and individuals against double taxation of income earned in other countries.