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The government is rolling out a new 72-installment plan to help individuals and businesses settle long-standing debts to the tax office and social security funds, in one of its biggest debt restructuring moves in years.
The new scheme, set to take effect in June, will cover debts accumulated up to December 31, 2023. Anyone wishing to join will first need to clear newer debts from 2024 onward or fold them into existing shorter repayment plans of 24 to 48 installments.
Officials say the cut-off date was not random. According to government sources, Brussels had raised objections but ultimately agreed to the plan covering older debts. At the same time, the state already collects about €3.2 billion under existing arrangements. Expanding the scheme further, they argue, would have created a significant gap in public finances, potentially reducing expected revenue by billions.
Who is included
The new framework is wide in scope. It is expected to cover around 1.3 million individuals and 284,000 businesses, with total debts estimated at about €95 billion.
The minimum monthly installment will be €30, and the interest rate will be set at 5.84%, matching existing long-term repayment schemes.
Those who join will also regain access to key tax clearance certificates, while enforcement measures such as bank account freezes and property seizures will be suspended.
Importantly, the plan also gives a second chance to debtors who previously lost older repayment arrangements due to missed payments. Many of them had been excluded from relief schemes introduced after 2024.
New relief measures
The government is also introducing additional relief tools. In some cases, bank account seizures can be lifted once 25% of the debt has been repaid and other obligations are up to date.
Debts between €5,000 and €10,000 may also be channelled into an out-of-court settlement mechanism, potentially affecting around 300,000 taxpayers.
A long history of repayment plans
This is not the first time Cyprus has introduced large-scale repayment schemes. Similar 36- to 72-month arrangements were introduced during the pandemic for debts built up between 2020 and 2021, followed by another scheme during the energy crisis covering debts up to the end of 2022.
While thousands joined those programs, a large stock of unpaid debt remains.
The bigger problem: old and “dead” debt
Tax data shows a striking pattern: about 80% of total debt was created before 2020, and more than half goes back to before 2014.
Many of these older debts are considered effectively uncollectable, linked to closed businesses, bankrupt companies, or individuals with no real ability to pay.
Authorities describe this as “dead debt,” where recovery becomes increasingly unlikely over time as assets disappear or cannot be traced.
A small group, a big burden
Another key issue is concentration. Less than 1% of debtors are responsible for the vast majority of unpaid amounts. In many cases, officials say, delays are not just due to financial hardship but also legal disputes, strategic non-payment, or penalties that have snowballed over time.
For the government, the challenge is clear: offer enough flexibility to bring people back into the system without weakening public finances in the process.
