Details are still coming up but these may be summarized as follows:

Cyprus and the Eurogroup[1]reached an agreement on 25 March 2013 on a package of measures intended to restore the viability of the financial sector and sound public finances over the coming years. 

Cyprus and the Troika[2] reached an agreement on the final terms of a memorandum of understanding in order to implement the agreement.

Cyprus will receive a loan of up to €10bn. The loan will carry interest at a rate between 2.5% - 2.7% and will be repaid over a period of twelve years after an initial grace period of ten years. The Cypriot government retains the right to repay the loan earlier.

It is expected that the memorandum will be formally approved on 12 April 2013 and, subject to the completion of national procedures, the first inflow of funds will be in mid-May.

Cyprus, subject to approval by the Cypriot Parliament, will increase the tax rates as follows:

• corporate income tax rate from 10% to 12.5% as from 1 January 2013;
• special contribution on passive interest income received by tax residents from 15% to 30%; and
• a special levy paid by banking institutions on deposits from 0.11% to 0.15%.

The memorandum also provides for the following measures:

• Reduction of salaries in the public and semi-governmental sector in order to safeguard the continuance of employment of a number of temporary employees.
• Contribution of 1.5% on salaries of civil servants and those entitled to free medical care.
• Privatization of semi-governmental organizations over the next five years.
• Management of Cyprus’ natural resources will remain with the Cypriot Government, however part of the proceeds from natural gas will be used to repay the loan.

Cyprus has agreed that the local financial sector will be downsized. The local banks disposed of their Greek operations, a step designed to protect the stability of both the Greek and Cypriot banking systems.

Additional measures include the resolution of the second-largest bank, and the recapitalization of the country’s largest bank. The following action was agreed:

1. Cyprus Popular Bank (Laiki) is resolved immediately using the Bank Resolution Framework. Equity shareholders, bondholders and uninsured depositors (those with deposits over €100.000[3]) will contribute to make up the losses.

2. Bank of Cyprus (BoC) has been recapitalized through a deposit/equity conversion of uninsured deposits, with full contribution of equity shareholders and bondholders. The conversion will be such that a capital ratio of 9 % is secured by the end of the program.

Currently 37.5% of uninsured deposits of BoC have been converted into Class A shares with voting and dividend rights. An additional 22.5% have been “frozen” and may also be partially or fully used to issue new class A shares as necessary.

The voting and dividend rights of existing shareholders and the rights of bondholders will be suspended until the total dividends to holders of Class A shares reach the original contribution plus interest at an annual rate of EURIBOR-3 months plus 10%.

3. All loans and credit facilities to Laiki Bank customers are transferred to BoC, subject to a set off with the uninsured deposits that remained in the 'bad' Laiki Bank. BoC will also take over the insured deposits as well as the deposits of charities, governmental and local authorities.

4. The Governing Council of the European Central Bank will provide liquidity to the BoC in line with applicable rules.

5. Depositors in all other Cyprus banks are fully protected, irrespective of the size of deposits.

The Cypriot authorities have introduced short term administrative measures, appropriate in light of the present unique and exceptional situation of Cyprus' financial sector and which allowed for a swift reopening of the banks.

These administrative measures include restrictions on cash withdrawals, compulsory renewal of maturing deposits and restrictions on capital movements. The measures are temporary and are regularly relaxed.

The agreed changes do not affect many of the advantages offered by Cyprus to the international business community and thus Cyprus continues to remain an attractive international financial centre. 

These advantages include:

• exemption from taxation of dividends received by companies either from Cyprus or abroad;
• exemption from taxation of gains from sale of shares and other securities;
• deductibility of interest paid on loans for the acquisition of 100% subsidiaries either in Cyprus or abroad;
• deductibility of 80% of the net income from the licensing/sale of intellectual rights;
• no withholding tax on the payment of dividends, interest, and royalties to  non-residents;
• no financial transaction tax;
• Cyprus’ extensive network of double tax treaties; and
• availability of highly skilled labor and a wide range of high quality professional services.