On 22nd July 2020, the Tax Department published Circular No.45 which contains clarifications regarding the transfer of immovable property by a related person, in the context of tax relief for credit facilities restructuring.
In accordance with the relevant provisions of the framework under reference, any borrower’s related person is also considered a borrower, as the term “related person” is interpreted in accordance with the provisions of article 33 of the Income Tax Law provided that the disposal and transfer of immovable property, as well as the transfer of rights under a sales contract deposited with the Department of Lands and Surveys is for the benefit of the lender.
The above provision is interpreted to include the transfer of immovable property by a related person directly to the lender, as well as the transfer of immovable property by the related person to a third party, which aims to reduce or repay credit facilities or loans or debts granted to borrowers.
Consequently, the tax relief framework for credit facilities restructuring also applies in cases where the related person of the borrower possesses and transfers immovable property to a third party to reduce or repay credit facilities or loans or debts granted to borrowers.
It should be noted that the case of the guarantor’s related person that transfers immovable property either to the lender or to a third party, is not applicable.