The Eurozone finance ministers and the International Monetary Fund signed a deal on 16 March 2013 in Brussels to aid Cyprus with a bailout worth 10 billion Euros. It is important to note that Cyprus is the fifth country to go to Eurozone for the financial aid because of sovereign debt crisis that kicked off in 2010.
Other countries that reached Eurozone for financial aid before Cyprus are Greece, Ireland, Portugal and Spain. However, the Eurozone agreed for the bailout agreement of up to 10 billion Euros, while Cyprus in 2012 had asked for around 17 billion Euros.
The Eurozone Central Bank and the International Monetary Fund agreed on the terms which included one-time tax of 9.9 percent on Cypriot bank deposits of over 130000 Dollars or 100000 Euros as well as the tax of 6.75 percent on smaller deposits.
Other elements of this deal demanded that Cyprus should raise the low corporate tax rate to 12.5 percent from its previous 10 percent apart from privatizing state assets as well as refurbishing the banks for making sure that money laundering is not done there.
Major points of the deal are as follows:
• Under the deal, Cyprus agreed for increasing the nominal corporate tax rate to 12.5 percent, thus increasing it by 2.5 percent.
• An imposition of 9.9 percent one-time tax on the bank deposits above 100000 Euros in the banks will be done apart from the 6.75 percent tax on the smaller deposits.
• The tax on interest which will be generated by the deposits will also be levied.
• The tax measures taken will help in boosting the revenues of Cyprus apart from limiting the loan size which is required from Eurozone.
Originally, Cyprus had estimated its requirement for 17 billion Euros, which was the amount that it required for restoration of its economy. Of this, 10 billion Euros was required for recapitalizing the banks while 7 billion Euros was required for the servicing debt as well as the operations of the government.