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Cyprus Shipping Companies

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Cyprus – one of the globally most important shipping centres

Shipping business dates back more than 3000 years in Cyprus. Strategically located on the East-Mediterranean cross-road of maritime transport lines between the Middle East, Asia and the East Coast of Africa on the one side, and Europe on the other side, Cyprus is home to many international shipping companies.

Cyprus Shipping Companies in international maritime business

Overview

With more than 1.800 ocean-going vessels of more than 21 million gross tonnage registered in Cyprus, and with more than 2.300 ocean-going vessels of more than 50 million tonnage under the management and control of more than 150 Cyprus shipping companies, Cyprus established itself as a global shipping centre, holding impressive positions:

  • Largest third party ship management centre in the EU

  • 5th largest third party ship management centre globally

  • Among the top three ship management centres globally

  • 3rd largest merchant fleet in the EU

  • 10th largest merchant fleet in the world

Cyprus home to many renown maritime names, such as, to name a few, the Italian MSC Mediterranean Shipping Company, the German-owned Colombia Lines, the Russian Unicom Management Services, the Polish Euro-Africa Line, the German Intership Navigation, or the Swedish Stena Line. Cyprus offers a strong maritime supply industry, mainly based in Limassol.

 

Cyprus offers a sound range of very competitive advantages to Cyprus Shipping Companies:

  • Well-developed and professional supply services for the shipping industry;

  • a modern and very advanced Tonnage Tax System, with no reference to corporate tax, with the most recent EU approval;

  • competitive ship registration costs and fees;

  • Cyprus signed all international maritime conventions on safety, security and pollution prevention;

  • Cyprus signed 28 bilateral Merchant Shipping Agreements;

  • 33 contracted maritime surveyors in 23 important ports of 14 countries;

  • no restrictions regarding the nationality of crews and officers;

  • full protection for financiers and mortgagees;

  • no inheritance tax.

 

The Cyprus Tonnage Tax System is the most advantageous tax system in the EU

The Cyprus Tonnage Tax System for Cyprus Shipping Companies

Currently, beginning of 2017, the Cyprus Tonnage Tax System bundles most of the favourable features found in tonnage tax systems of all EU countries, and of many other countries.

Who benefits from the Cyprus Tonnage Tax System?

The Cyprus Tonnage Tax System is granted to ship owners, ship charterers and ship managers who own, charter of manage one or more qualifying ships in qualifying shipping activities. The Cyprus Tonnage Tax is calculated based on the net tonnage of vessels. The Cyprus Tonnage Tax rates applying for ship managers are 25 % of the general Cyprus Tonnage Tax System applying for ship owners, regardless the flag of the ship, as long as it is managed or chartered by a Cyprus Shipping Company registered in Cyprus and with its physical office and staff in Cyprus.

Which ships qualify for the Cyprus Tonnage Tax System?

Any sea-going vessel certified under international rules and regulations and registered with a ship register of any member of the International Maritime Organisation and the International Labour Organisation, recognised by Cyprus.

Fishing vessels, ships primarily used for recreation or sport, river vessels, floating cranes without own drive and non-ocean-going tugs etc. are excluded from the benefits of the Cyprus Tonnage Tax System.

Which shipping activities qualify for the Cyprus Tonnage Tax System?

Qualifying shipping activities are any commercial maritime activities that constitute maritime transport, crew management, or technical maritime management.

Maritime transport includes carriage of goods and passengers as well as all retailing, hotel and entertainment activities on board of a qualifying ship. It furthermore includes the loading and dispatch of cargo, ticketing facilities and passenger terminals as well as towing, dredging and cable laying ships.

How do Cyprus Ship Owner Companies benefit from the Cyprus Tonnage Tax System?

Ship owners of qualifying Cyprus flag ships automatically benefit from the Cyprus Tonnage Tax System.

Cyprus Ship Owner Companies of vessels with a flag of an EU member state or any other state may opt whether they wish to be taxed by the Cyprus Tonnage Tax System, or by corporate tax, under certain conditions. The main conditions are that the commercial and strategical management of the ships is carried out from the EU/EEA, and that a certain percentage of ships flies an EU flag for minimum three years from the date of opting for the Cyprus Tonnage Tax System.

Cyprus Ship Owner Companies that opted for the Cyprus Tonnage Tax System must remain in the system for at least 10 years; early withdrawal will lead to fines compensating to the level of the corporate tax rate.

The Cyprus Tonnage Tax System covers the following classes and types of profit: profit from shipping operations, dividends paid out of such profits (there is no withholding tax in Cyprus anyway), profits from the sale of ships and interest gained on funds used as working capital or for the financing, operation and/or maintenance of the ships.

The Cyprus Tonnage Tax for qualifying Cyprus Ship Owners and Charterers may be calculated here.

How do Cyprus Ship Charter Companies benefit from the Cyprus Tonnage Tax System?

Cyprus Ship Charter Companies that charter one or more ships under bareboat, demise, time or voyage charter are entitled to benefit from the Cyprus Tonnage Tax System by option, under the condition that the tonnage under time and/or voyage charter does not exceed 75% of ships chartered and owned, for more than three consecutive years. If the ships chartered are flying an EU/EEA flag or their crew and technical management is carried out in the EU/EEA, the aforementioned threshold raises to 90%.

Once opted for the Cyprus Tonnage Tax System, a Cyprus Ship Charter Companies must remain in the system for at least 10 years; early withdrawal will again lead to fines compensating to the level of the corporate tax rate.

The Cyprus Tonnage Tax System covers the following classes and types of profit: profit from shipping operations, dividends paid out of such profits (there is no withholding tax in Cyprus anyway), profits from interest gained on funds used as working capital or for the payment of expenses arising from chartering.

The Cyprus Tonnage Tax for qualifying Cyprus Ship Owners and Charterers may be calculated here.

How do Cyprus Ship Management Companies benefit from the Cyprus Tonnage Tax System?

Cyprus Ship Management Companies providing crew and/or technical ship management are entitled to benefit from the Cyprus Tonnage Tax under the following conditions:

  • Maintaining a fully-fledged office in Cyprus, which is a condition for all Cyprus Shipping Companies benefiting from the Cyprus Tonnage Tax;
  • sufficient number of staff must be employed in Cyprus, of which min. 51% must be citizens of the EU/EEA;
  • at least 2/3 of the management is carried out from the EU/EEA;
  • a certain share of ships managed must fly an EU/EEA flag, constantly for more than three years from the date of opting for the Cyprus Tonnage Tax;
  • all ships and crews under management must comply with all relevant international standard and EU laws.

Once opted for the Cyprus Tonnage Tax System, a Cyprus Ship Management Company must remain in the system for at least 10 years; early withdrawal will again lead to fines compensating to the level of the corporate tax rate.

The Cyprus Tonnage Tax covers the following classes and types of profit: profit from the provision of crew and/or technical management, dividends paid out of such profits (there is no withholding tax in Cyprus anyway), and profits from interest gained on funds used as working capital or for the payment of expenses arising from the management of vessels.

The Cyprus Tonnage Tax for qualifying Cyprus Ship Management Companies may be calculated here.

Shanda Consult is specifically dedicated to maritime services (well, the owner of Shanda Consult comes from the beautiful Hanseatic City of Lubeck) and will be happy to advise and assist you with your maritime affairs related to the Cyprus Tonnage Tax System and the establishment of your operations in Cyprus. Please contact us.

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