COVID-19 | Support Package (May 2020)

1. Financing via the Pan-European Guarantee Fund

Description

• Member States to provide guarantees (totaling €25bn with Cyprus share being €32.5mln) to the Pan-European Guarantee Fund (the “Fund”), to support existing products of the European Investment Bank (EIB).
• The EIB group will provide guarantees of up to 80% to the participating Financial Institutions (the “FIs”) ­­à Local FIs are then able to provide financing to businesses.
• Cyprus businesses potentially to receive €300-400mln (no quota per member state).

Eligibility

• SMEs & Mid-Caps (≤3.000 employees), who need access to liquidity to cope with crisis caused by the pandemic, but viable in the long-term.
• As per the EIB, the focus is on SMEs (65% of funds), while 5% of the Fund could be allocated to public sector, health, health-research, etc.

Terms

• The Fund will become operational as soon as Member States accounting for at least 60% of EIB capital have signed contribution agreements and a Contributors Committee is set up. The Fund’s initial investment period is until 31 December 2021.
• The Minister of Finance expects the fund to be activated in September 2020.
• Once the funds are available, companies can file applications with participating FIs.

 

2. Financing via the European Investment Bank (EIB)

Description

• Cyprus provides Government Guarantees to EIB and Agreements are signed between EIB & participating Financial Institutions (“FIs”).
• Existing scheme since 2014, with the purpose of strengthening the Cyprus economy and financing SMEs & Mid-Caps.
• Based on the Council of Ministers decision, the budget for the scheme is now increased by an amount of €500mln.

Eligibility

• SMEs & Mid-Caps (≤3.000 employees).
• Cypriot companies registered and operating in Cyprus.
• No layoffs allowed over 2% of staff (as of the date the Scheme was proclaimed) if scheme utilised jointly with the Government Interest Subsidy Scheme.

Favorable loan terms:

Terms

• Interest rates envisaged to be lower by 0,5% compared to rates without the said EIB funding, while an additional reduction 0,5% is possible for companies under “Jobs for Youth” plan.
• Interest for loans contracted under the Scheme may obtain subsidy under the “Government Interest Subsidy Scheme”.
• Option for fixed or floating interest rate.
• Loan tenor: up to 12 years.

 

3. Financing via Cyprus Entrepreneurship Fund

Description

• Cyprus Entrepreneurship Fund (CYPEF) existing since 2013; additional €400mln (allowing €800mln financing). It is managed by the European Investment Fund of EIB with no government involvement in the lending process.
• Co-financing & risk sharing: CYPEF receives 50% of funding from the Cyprus Government through a loan it will undertake from EIB and participating FIs provide remaining 50%.
• Participating FIs under CYPEF include:
  • Bank of Cyprus
  • Ancoria Bank

Eligibility

• SMEs (≤250 employees).
• No layoffs allowed over 2% of staff (as of the date the Scheme was proclaimed) if scheme utilised jointly with the Government Interest Subsidy Scheme.

Terms

Lower interest rates:

• Indicative interest rates of existing scheme:
  • low risk: 2,55% – 3,85%.
  • high risk: 3,375% – 4,5%.
• Interest for loans contracted under the Scheme may obtain subsidy by the “Government Interest Subsidy Scheme”.
• Loan amount: up to €1,5mln.
• Loan tenor: up to 12 years.

 

4. Government Interest Subsidy Scheme for New Business Loans

Description

• Loans to cover liquidity needs for the following purposes:
  • Working capital.
  • Not for repayment or restructuring of existing facilities.
• Competent & Assigning Authority: Treasury Dept. / Ministry of Finance.

Eligibility

• Aid may be granted to business enterprises that:
  • were not in difficulty on 31 Dec 2019 (per definition of European Commission);
  • but face difficulties or have entered into difficulty as a result of the COVID-19 outbreak.
• Relates to very small, small, medium size and large business enterprises and self-employed.
• No layoffs allowed over 2% of staff (as of the date the Scheme was proclaimed).

Terms

Interest rate subsidy (max. 4 years):

• For Years 1-2: up to 3,5%.
• For Years 3-4: up to 2% for SMEs & 1,5% for large enterprises.

Restrictions:

• Loan with subsidised interest cannot exceed:
  • 2 x annual payroll costs for 2019, or
  • 25% of total turnover for 2019
• Total subsidy per undertaking cannot exceed cumulatively €800ths.
• Loan interest rate may not exceed 4,25%.

Relates to business loans contracted / to be contracted during 1^st March to 31^st December 2020.

 

5. Interest Subsidy Scheme for new Housing Loans

Description

• Interest rate subsidy for new housing loans, for the purposes of owner occupancy.
• New housing loans may not be used for repayment of existing housing loans.
• Competent & Assigning Authority: Treasury Dept. / Ministry of Finance.

Eligibility

• Households

Terms

Interest rate subsidy:

• Maximum 4 years.
• Interest rate subsidy up to 1,50%.

Restrictions:

• Loan amount may not exceed €300ths.
• Loan interest rate may not exceed 2,30%.
• Relates to housing loans contracted / to be contracted during 1^st March to 31^st December 2020.

6. Subsidy scheme for Very Small, Small & Self-employed

Description

• Purpose: One-off subsidy to cover rent or other liabilities and running expenses.
• Total budget estimated at €100mln.

Eligibility

• Very small and small enterprises & self-employed (≤ 50 employees), who have been approved in the Special Schemes of the Ministry of Labour (for full or partial freeze of operations) during 13 April – 12 May 2020.
• Conditions for non-dismissal of employees as per the Special Schemes of the Ministry of Labour.

Terms

Amount of one-off subsidy:

No of employees	One-off subsidy
Up to 1	€1.250
2-5	€3.000
6-9	€4.000
10-50	€6.000

 

7. Construction sector support

Description

• Immediate Promotion of development projects:
• The Council of Ministers decided to instruct all competent authorities to proceed immediately to invite tenders for all development projects that are matured and ready to be offered for tendering, regardless of the scheduled period of their announcement on the basis of the budget.
• The project concerning the House of Representatives building is excluded.

 

8. Tourism sector – Airlines

Description

• Incentives scheme for airline companies
• Aims to improve flight connectivity between Cyprus and other countries and support the tourist sector.
• Incentive scheme of €6.3mln will be offered for a period of 7 months supplementary to existing ones for which additional credits amounting to €9.369mln shall be extended until the end of 2020.
• The additional support to all airline companies for a period of seven months will be provided through subsidisation of flights to Cyprus, covering aircraft occupancy rates of 40%-70%.

 

9. Tourism sector – Co-promotion with tourist agents

Description

• Aims to attract tourism and promote Cyprus as a safe tourist destination.
• Starting 1^st June 2020.
• Budget €10mln.

 

10. Tourism sector – Reduction of the VAT rate

Description

• Reduction of the VAT rate from 9% to 5% in the catering, hotel, and tourist accommodation sectors.
• VAT rates reduction are expected to lead retail sales prices to decline in favour of both consumers and businesses and invigorate consumer demand.

 

11. Tax Department – extension of deadlines

Description

• Extension of deadline for the submission of income tax returns by salaried persons.
• Both the submission of the tax returns and the payment of the resulting tax obligations are extended until the end of October 2020.

 

12. Tax Department – Deletion of encumbrances

Description

• Deletion of encumbrances imposed due to the non timely submission of tax returns for the periods that ended on 10/04/2020 and 10/05/2020.

 

13. “Estia” Scheme extension of deadlines

Description

• A new one-month extension of the deadline will be granted for presenting the necessary documentation by interested persons who had submitted an application by 31.12.2019 to join the Estia Scheme.
• The new deadline is set at 31^st July 2020
• Borrowers who had not submitted an application to join the Estia Scheme until 31.12.2019 are granted the opportunity to do so. The new applicants should complete and submit their application envisaged in the Scheme to the banking and other credit institutions during the period from 1^st June 2020 until 15^th June 2020.

Covid-19 | Support Package (May 2020) – Appendix

	Glossary
CYPEF	Cyprus Entrepreneurship Fund
EC	European Commission
EIB	European Investment Bank
EIF	European Investment Fund
EU FI	European Union Financial Institution
mln	Millions
n/a	Not applicable
SME	Small and medium-sized enterprises
ths	Thousands
VAT	Value Added Tax

 

Enterprise category	Headcount: Annual work until		Annual turnover		Annual balance sheet total
Medium caps	≤ 3.000		n/a		n/a
Medium-sized	≤ 250	and	≤ €50mln	or	≤ €43mln
Small	≤ 50	and	≤ €10mln	or	≤ €10mln
Micro/Very small	≤ 10	and	≤ €2mln	or	≤ €2mln