Law 72(I) of 2011 established a maximum rate of interest, the
"reference rate", that can be charged on loans and made
it a criminal offence to charge interest above that rate. The
interest rate ceiling is calculated by the Central Bank of Cyprus
using a formula based on half the average bank lending rate of the
previous year plus a margin of between 5 and 10 percentage points,
which varies according to various risk factors.
The restrictions on interest rates do not apply to credit
institutions or:
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Loans where the lender and the borrower are legal persons which are deemed to be connected persons for the purposes of article 33 of the Income Tax Law.
-
Loans to legal persons where the capital out of which the loan is provided derives directly or indirectly from sources outside Cyprus provided that the amount of the loan exceeds €1,000,000 and the minimum drawdown amount is €500,000.
-
Loans to legal persons which are disbursed overseas provided that the amount of the loan exceeds €1,000,000 and the minimum drawdown amount is €500,000.
The Central Bank of Cyprus has recently announced that the
reference rate has been revised to 12.51 percent per annum.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
