In pursuance to the Cyprus – Troika memorandum of understanding, Cyprus will be obliged to abolish all exceptions for paying the Annual Levy of Euro 350. In accordance to existing rules and exceptions, the annual levy is only paid by Companies which have real activities and companies with assets in Cyprus.

Abolishing the exceptions for payment of the annual company levy will subject approximately half of all the registered companies to the annual levy of Euro 350. The policy will certainly lead to many liquidations of dormant companies and the tidying up of the company registry. It is quite uncertain whether the measure will be effective in raising revenues for the government, as it is impossible to ascertain how many of the dormant Cyprus companies are indeed dormant for a reason and how many are not. Our guess is that the end effect for the government revenues will be minimal.

The policy is expected to take effect in year 2013 and will cover the company levy imposed for 2013.

Cyprus Banks will now have to pay a levy on all deposits they hold at the end of each financial year. The levy will be calculated on all deposits, other than interbank and deposits from financial institutions. This special bank levy will be at the rate of 0.095%.

This measure is projected to raise an annual revenue of 120 million Euro to be used for the establishment of a Financial Stability Fund to save for any future exposure of the banks to global crisis effects.

The Banking sector in Cyprus, being relatively large, due to the characteristic of Cyprus as a financial centre for so many years, is a cause for concern, to some of the US based rating agencies and the measure seems to be a prompt reply to such concerns raised recently.